WASHINGTON (AP) 鈥 Inflation rose last month to its highest level since February as President Donald Trump's sweeping tariffs push up the cost of a range of goods, including furniture, clothing, and large appliances.
Consumer prices rose 2.7% in June from a year earlier, the Labor Department said Tuesday, up from an annual increase of 2.4% in May. On a monthly basis, prices climbed 0.3% from May to June, after rising just 0.1% the previous month.
Worsening inflation poses a political challenge for Trump, who promised during last year鈥檚 presidential campaign to immediately lower costs only to engage in a whipsawed frenzy of tariffs that have left businesses and consumers worried. Trump has declared that the U.S. effectively has no more inflation as he has Federal Reserve Chair Jerome Powell into cutting short-term interest rates.
Yet the bump in inflation last month makes it more likely that the central bank at the central bank's next meeting in two weeks. Powell has said that he wants to see how the economy reacts to Trump鈥檚 duties before reducing borrowing costs.
Excluding the volatile food and energy categories, core inflation increased 2.9% in June from a year earlier, up from 2.8% in May. On a monthly basis, it picked up 0.2% from May to June. Economists closely watch core prices because they typically provide a better sense of where inflation is headed.
The uptick in inflation was driven by a range of higher prices. The cost of gasoline rose 1% just from May to June, while grocery prices increased 0.3%. Appliance prices jumped for the third straight month. Toys, clothes, audio equipment, shoes, and sporting goods all got more expensive, and are all heavily imported.
鈥淵ou are starting to see scattered bits of the tariff inflation regime filter in,鈥 said Eric Winograd, chief economist at asset management firm AllianceBernstein, who added that the cost of long-lasting goods rose last month, compared with a year ago, for the first time in about three years.
Winograd also noted that housing costs, one of the biggest drivers of inflation since the pandemic, has continued to cool, which is holding down broader inflation. The cost of rent rose 3.8% in June compared with a year ago, the smallest yearly increase since late 2021.
鈥淲ere it not for the tariff uncertainty, the Fed would already be cutting rates,鈥 Winograd said. 鈥淭he question is whether there is more to come, and the Fed clearly thinks there is,鈥 along with most economists.
Some items got cheaper last month, including new and used cars, hotel rooms, and air fares. Travel prices have generally declined in recent months as fewer international tourists visit the U.S.
The report set up a broader political battle over Trump鈥檚 tariffs, a fight that will ultimately be determined by how the U.S. public feels about their cost of living and whether the president is making good on his 2024 promise that his agenda would help the middle class.
The White House pushed back on claims that the report showed a negative impact from tariffs, since the cost of new cars were down despite the 25% tariffs on autos and 50% tariffs on steel and aluminum. The administration also noted that despite the June bump in apparel prices, clothing prices are still cheaper than they were three months ago.
鈥淐onsumer Prices LOW,鈥 Trump posted on Truth Social. 鈥淏ring down the Fed Rate, NOW!!!鈥
For Democratic lawmakers, the inflation report confirmed their warnings over the past several months that Trump鈥檚 tariffs would push up inflation. Their argument on Tuesday was that the situation will likely get even more painful given the size of the tariff rates that Trump posted over the past week.
鈥淔or those saying we have not seen the impact of Trump鈥檚 tariff wars, look at today鈥檚 data. Americans continue to struggle with the costs of groceries and rent 鈥 and now prices of food and appliances are rising,鈥 said Sen. Elizabeth Warren, D-Mass.
Many firms built up their stockpiles of goods this spring and were able to delay price hikes, while others likely held off raising prices while they waited to see if the duties would become permanent or would be negotiated away.
More businesses now appear to be throwing in the towel and passing on costs to consumers, including Walmart, the world鈥檚 largest retailer, which has said it raised prices in June. Automaker Mitsubishi said last month that it was lifting prices by an average of 2.1% in response to the duties, and Nike it would implement 鈥渟urgical鈥 price hikes.
At a news conference last month, Powell said companies all along the price chain would seek to avoid paying the tariffs, but that ultimately some combination of businesses and the consumer would ultimately bear the cost.
鈥淭here鈥檚 the manufacturer, the exporter, the importer, the retailer, and the consumer, and each one of those is going to be trying not to be the one to pay for the tariff,鈥 the Fed chair said. 鈥淏ut together, they will all pay for it together鈥攐r maybe one party will pay it all. But that process is very hard to predict, and we haven鈥檛 been through a situation like this.鈥
Trump has imposed of 10% on all imports plus 30% on goods from China. Just last week the president threatened to hit the European Union with a .
He has also threatened to slap , which would push up the cost of orange juice and coffee. Orange prices leaped 3.5% just from May to June, and are 3.4% higher than a year ago, the government said Tuesday.
Overall, grocery prices rose 0.3% last month and are up 2.4% from a year earlier. While that is a much smaller annual increase than before the pandemic, it is slightly bigger than the pre-pandemic pace. The Trump administration has
The acceleration in inflation could provide a respite of sorts for Powell, who has come under from the White House for not cutting the benchmark interest rate.
The Fed chair has said that , a tricky combination for the central bank since higher costs would typically lead the Fed to hike rates while a weaker economy often spurs it to reduce them.
Last week, White House officials for cost overruns on the years-long renovation of two Fed buildings, which are now slated to cost $2.5 billion, roughly one-third more than originally budgeted. While Trump legally can't fire Powell just because he disagrees with his interest rate decisions, the Supreme Court has signaled, he may be able to do so 鈥渇or cause,鈥 such as misconduct or mismanagement.
