June Inflation Report

The Consumer Price Index for all urban consumers increased by 0.3% on a seasonally adjusted basis in June. In comparison, it rose by approximately 0.1% in May. Over the past 12 months, the all-items index increased by 2.7% before adjustments, exceeding the expected 2.4%. Core inflation, which excludes volatile food and energy prices and is viewed as a reliable measure of price pressures, rose to 2.9% compared to the same period last year.

The Consumer Price Index (CPI) measures how much prices paid by consumers for goods and services change. It reflects spending patterns for two groups: all urban consumers, which makes up over 90% of the U.S. population, and urban wage earners and clerical workers. It does not include the spending habits of people in rural areas, farming families, members of the Armed Forces, or those in institutions like prisons and mental hospitals.

The June data only reflects the initial effects of the global trade war, with many household products, such as appliances and furniture, affected by tariffs. Food and gasoline prices also increased. Economists expect these price pressures to grow in the coming months due to the additional tariffs proposed by Trump this month. Inflation has remained more subdued than expected, partly because many foresee a stagflationary shock where inflation rises amid economic contraction. This also raises concerns regarding potential rate cuts. Trump has urged Powell for weeks to take action, even threatening to replace him if he doesn’t. To justify a rate cut, the Fed needs evidence that inflation is under control or that the labor market is significantly weakening. So far, neither condition has been met, indicating little urgency among most officials for the central bank to change policy. A reliable measure of pressure on prices is also up to 2.9% from the same time last year.