WASHINGTON (AP) 鈥 Inflation rose last month to its highest level since February as President Donald Trump's sweeping tariffs are pushing 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 President Donald Trump, who promised during last year鈥檚 presidential campaign to immediately lower costs. The sharp inflation spike of 2022-2023 was the worst in four decades and soured most Americans on former president Joe Biden鈥檚 handling of the economy. Higher inflation will also likely heighten the Federal Reserve鈥檚 , as Trump is .
Trump has often insisted in comments on social media that there is 鈥渘o inflation鈥 and that as a result, the central bank should swiftly reduce its key interest rate from its current level of 4.3% to around 3%.
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 gas rose 1% just from May to June, while grocery prices increased 0.35. Appliance prices jumped for the third straight month.
Trump has imposed of 10% on all imports, plus 50% levies on steel and aluminum, 30% on goods from China, and 25% on imported cars. Just last week the president threatened to hit the European Union with a .
The acceleration in inflation could provide a respite of sorts for Federal Reserve Chair Jerome Powell, who has come under increasingly heavy fire from the White House for not cutting the benchmark interest rate.
Powell and other Fed officials have emphasized that they want to see how the economy evolves as the tariffs take effect before cutting their key short-term 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.
Trump on Monday said that Powell has been 鈥渢errible鈥 and 鈥渄oesn鈥檛 know what the hell he鈥檚 doing.鈥 The president added that the economy was doing well despite Powell鈥檚 refusal to reduce rates, but it would be 鈥渘ice鈥 if there were rate cuts 鈥渂ecause people would be able to buy housing a lot easier.鈥
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.
Some companies have said they have or plan to raise prices as a result of the tariffs, including Walmart, the world's largest retailer. 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 to offset tariff costs.
But many companies have been able to postpone or avoid price increases, after building up their stockpiles of goods this spring to get ahead of the duties. Other companies may have refrained from lifting prices while they wait to see whether the U.S. is able to reach trade deals with other countries that lower the duties.
