United States
Consumer prices rose 0.3% in June, taking CPI from 2.4% to 2.7% on a year-on-year basis. Core prices also were up 0.2% month-on-month and 2.9% year-over-year.
The “sticky” core services components continued to ease although tariff inflation became more visible in some goods categories. We believe the Fed will be encouraged that disinflationary forces remain in play but expect it to be cautious regarding the inflationary impact of tariffs.
Tariff impacts are starting to show up
Energy costs rose 0.9% and food prices rose 0.3%. Core goods prices rose 0.2%, with inflation in tariff-sensitive categories partly offset by used cars and new cars falling -0.7% and -0.3% respectively.
Figure 1: Slight increases across major categories push headline CPI up1
Tariff inflation was notable in household furnishings and supplies, which rose 1% in June (the fastest since Jan 2022), with appliances up 1.9% (the fastest since August 2020) and sporting goods up 1.4% (the fastest since January 2024).
Our estimated measure of tariff-sensitive goods CPI (which comprise ~8% of the index), rose by 0.7% in June (Figure 2). With the Trump administration announcing new tariffs set to take effect in August, the tariff-induced pick in prices could meaningfully accelerate from here, absent further trade deals or delays.
Figure 2: Tariff driven inflation accelerated in June2
“Sticky” core services categories continue to ease
On a more positive note for the Fed, the “sticky” shelter inflation category (which is the largest CPI component) was 3.8% year-on-year, it’s lowest since November 2021. Excluding shelter, headline CPI was 2%. Shelter continues to improve although other core services categories did not ease3
Figure 3: Shelter inflation continues to ease4
The fed will be looking to balance easing services CPI with tariffs
We expect the Fed to remain mindful of tariff inflation, but we expect it will keep the door open to rate cuts this year given continued evidence of demand-related easing in services categories.
