Customers line up at the check out booth on April 18, 2025 at a Costco branch in Niantic, Connecticut.
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The annual inflation rate ticked higher in June, in line with expectations, as lower prices at the gasoline pump somewhat offset higher prices at the grocery store.
Economists said they expect the full impact from the Trump administration’s tariff agenda to raise consumer prices more in the months ahead — but they said trade policies have already started to noticeably affect inflation.
The consumer price index, a key inflation barometer, rose 2.7% in the 12 months through June, up from 2.4% in May, the Bureau of Labor Statistics said Tuesday.
Tariffs’ inflationary effect
President Donald Trump’s tariffs continue to work their way through the U.S. economy, even as the risk of further escalation grows.
Trump announced Saturday that the U.S. will impose 30% tariffs on the European Union and Mexico starting Aug. 1. On Monday, Trump threatened to impose “secondary tariffs” on Russia’s trade partners, “at about 100%.”
Tariffs are a tax on imports from foreign nations, paid by U.S. companies that import the good or service. Businesses negatively affected are expected to pass on at least some of that additional cost to consumers through higher prices.
“While inventory front-running has mitigated the need to raise goods prices, it will become increasingly difficult for businesses to absorb higher import duties as pre-tariff stockpiles dwindle,” Sarah House, senior economist at Wells Fargo, said in a July 8 research report. “We expect core goods prices to pick up further in the second half of the year as a result.”
“As we are in this higher tariff environment longer, you will begin to see more of these effects,” House told CNBC.
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White House economic advisor Kevin Hassett has argued that new tariff policies have not been as inflationary as expected because consumers are buying more American-made goods.
But other economists also predict the full impact from tariffs on pricing will likely show up in the second half of the year.
“Inflation is going kick into a much higher gear in coming months,” said Mark Zandi, chief economist at Moody’s. “We are on the leading edge of that now, but it will become clearly evident in the months ahead.”
“Higher tariffs are also adding to businesses’ production costs and that will flow through to consumers more indirectly,” Zandi said.
‘This won’t be like 2022’
Still, longer-term inflation expectations are somewhat muted. “Despite accelerating inflation, this won’t be like 2022,” said Stephen Kates, Bankrate’s financial analyst. He pointed to the June report three years ago, when inflation spiked to 9.1%, marking the largest year-over-year jump since 1981.
In many ways, shoppers are still struggling with that sticker shock, Kates said. “People have long memories for that,” he said.
“I used to pay $2 for a can of peas and now it’s $3.50,” he said as an example. “That is a huge change, and you are constantly reminded of it every week.”
There were some mixed signals in this month’s report.
Grocery prices rose 0.3% over the month and were 2.4% higher year over year. The meats, poultry, fish and eggs index jumped 5.6% over the last 12 months. However, while eggs are still almost 30% higher than they were a year ago, they’re down 7% from last month.
Inflation for housing, the largest CPI component, increased just 0.2% for the month but was 3.8% higher compared to a year ago. That was the largest contributor to the overall CPI gain, the BLS said.
Gasoline prices increased by 0.1% from May to June, on a seasonally adjusted basis, but are down 8.3% for the year, according to the CPI data.
Meanwhile, prices for used cars and trucks declined in June, with prices on new vehicles falling 0.3% and used car and trucks down 0.7%. Airline fares were also slightly lower, by 0.1%.
“There are a lot of cross currents, but the net is a general tilt higher, and that’s a precursor to stronger inflation numbers in the months ahead,” Zandi said.
Core inflation — which strips out energy and food prices, which can be volatile categories — was up 2.9% in June.
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