Key Takeaways
- A June report on the Consumer Price Index should show a bump in the inflation rate, possibly due to the impact of President Donald Trump’s tariffs.
- Some forecasters expect tariffs to have an “undeniable” effect on prices, while others are uncertain.
- Inflation has stayed relatively mild this year despite concerns among experts and the public that merchants will pass tariff costs on to customers.
So far, the impact of President Donald Trump’s campaign of steep tariffs against U.S. trading partners has been difficult to spot in hard economic data, but that may be about to change.
A report on the Consumer Price Index is expected to show a notable uptick in inflation, according to the Bloomberg consensus forecast, cited by Wells Fargo Securities. The consensus forecast calls for the CPI to have risen 2.7% over the year in June, up from a 2.4% increase in May. “Core” CPI, which excludes the volatile prices for food and energy, is forecast to have risen 3% over the year, up from 2.8% in May.
An uptick in line with expectations could give ammunition to experts who have predicted Trump’s heavy import taxes would show up in price tags sooner or later, as manufacturers, importers, and retailers pass the cost of the duties down the supply chain. Trump has imposed numerous tariffs since taking office including a 10% tariff on most imported products, a 25% tariff on foreign cars, and tariffs over 50% against Chinese products.
“The tariff boost to consumer prices will be undeniable in June’s data,” economists at Pantheon Macroeconomics, led by Samuel Tombs, wrote in a commentary.
To be sure, economists are not united in that expectation.
“Certain tariff-sensitive components likely rose in June, but the overall impact from tariffs remained limited,” analysts at Nomura led by Aichi Amemiya wrote in a commentary. “We maintain our medium-term outlook that tariffs will likely exert more inflationary pressures later this year, but the timing of an inflation acceleration remains uncertain.”
The report could have implications for the Federal Reserve, which meets at the end of the month to set interest rates. Fed officials have kept their influential interest rate higher than usual to quash inflation, and have refrained from cutting it despite several months of relatively mild inflation reports, out of concern that a hit from tariffs is coming.
“We expect the June CPI report to show inflation beginning to strengthen again, albeit not enough to alarm Fed officials at this juncture,” Sarah House and Nicole Cervi, economists at Wells Fargo Securities, wrote in a commentary.
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