American inflation accelerated in June as President Trump’s trade war began to have a more significant impact on the economy, according to government data released Tuesday.
The Consumer Price Index rose 2.7% from a year ago, the fastest pace since February, the Bureau of Labor Statistics reported. This exceeded expectations and marked an increase from May’s 2.4% annual rate.
Core inflation, which excludes volatile food and energy prices, also climbed to 2.9% annually. Monthly price increases jumped to 0.3% in June, up from 0.1% in May.
The data shows the early effects of Trump’s escalating trade war. Products most exposed to tariffs saw sharp price increases. Household furnishings rose 1% in June, significantly higher than the 0.3% increase in May. Appliance prices surged 1.9%, up from 0.8% previously.
Gasoline prices increased 1% after falling 2.6% the month before. Grocery prices also rose 0.3% in June, or 2.4% annually.
Economists expect price pressures to intensify if new tariffs threatened against the European Union and other countries take effect on August 1 as planned.
The inflation data complicates the Federal Reserve’s decision-making on interest rates. The central bank has maintained steady rates since January, adopting a “wait-and-see” approach to Trump’s economic policies.
Fed officials worry about stagflation – a scenario where inflation rises while economic growth stagnates. The latest trade escalation has increased these risks.
For the Fed to cut interest rates, officials need clear evidence that inflation is under control or that the job market is significantly weakening. Neither condition has been met.
The Fed’s cautious stance has frustrated Trump, who has repeatedly demanded lower interest rates and publicly criticized Fed Chair Jerome Powell almost daily.
The Federal Reserve’s next policy meeting is scheduled for July 30.
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