The U.S. Consumer Price Index (CPI) in June increased by 2.7% over 12 months, exceeding predictions and above the Federal Reserve's long-term target of 2%.
This increase is driven by the costs of housing, food, energy, and household goods. Although President Donald Trump claims that inflation is no longer a threat, experts warn that current tariffs and trade tensions could push consumer costs even higher.
MAIN CONTENT
The CPI in June rose by 2.7% compared to the same period last year, higher than the forecast and above the Fed's target.
Housing accounts for the largest share of inflation with a year-on-year increase of 3.8%.
Record-high import taxes could escalate inflation in the near future.
How much did the U.S. Consumer Price Index (CPI) rise in June compared to the same period last year?
Economists from the U.S. Bureau of Labor Statistics (BLS) reported that the CPI rose 2.7% compared to June of the previous year, exceeding the 2.4% of May. This is a notable increase, far surpassing the Fed's stabilization target of 2%, indicating that inflationary pressures remain high despite efforts to contain it.
On a month-over-month basis, the CPI increased by 0.3%, the largest monthly rise since January. However, the core CPI (excluding food and energy) only increased by 2.9%—slightly below analysts' forecast of 3%.
What are the main factors contributing to the CPI increase?
The BLS reports that housing is the main factor influencing overall inflation, increasing by 3.8% year-on-year, although June saw only a slight increase of 0.2%. Rent and equivalent rent values increased by 0.3%, while lodging services decreased by 2.9%. Other categories such as food increased by 3%, and energy rose by 0.9% after a decline in May, putting pressure on the overall index.
The transportation and healthcare service groups also recorded increases of 0.2% and 0.6%, respectively. Meanwhile, new car prices decreased by 0.3% and used cars dropped by 0.7%, reflecting a mixed trend in the goods market.
Inflation has reached a stable level and is no longer a threat to the U.S. economy; we are witnessing a strong recovery and confidence in long-term economic prospects.
Donald Trump, President of the United States, July 2025, at the White House
How are high tariffs affecting inflation in the United States?
Trade tensions along with an average tariff rate of 18.7%, the highest since 1933, are increasing import costs and contributing to driving consumer inflation. Tariffs such as 30% on Chinese goods, 50% on steel and aluminum, 25% on auto parts, and a general 10% tariff on other items create upward price pressure in essential and consumer goods.
Additionally, new tax threats against the European Union (30%), Mexico (30%), Canada (35%), and Brazil (50%) could exacerbate trade tensions, causing consumer product prices to continue to rise.
If categories of goods are significantly impacted by increased tariffs, that would be the worst-case scenario for the CPI, and the market needs to prepare for this impact.
George Goncalves, Head of U.S. Economic Strategy at MUFG, July 2025
What is the reaction of the financial market and the forecast for Fed interest rates?
Although the June CPI was stronger than expected, the financial market anticipates that the Federal Reserve will begin lowering short-term interest rates starting in September. The probability of a rate cut in July is currently only 5%, but the cumulative expectation for the entire year is increasing as investors believe that monetary policy will be loosened before the end of the year.
This reaction is based on the assessment that inflation is not too severe and monitoring measures can help stabilize the economy despite ongoing challenges from trade conditions and consumer costs.
Comparison table of tariff impacts and consumer prices
Item group Average tariff rate (%) Impact on June CPI Notes Chinese goods 30 Increased consumer prices in the imported goods sector High tariffs affect supply chains Steel and aluminum 50 Raise energy and construction prices Tariffs imposed since 2018, no signs of reduction Cars and parts 25 New and used car price segments fluctuate Conversely may increase personal transportation costs General imported goods 10 Indirectly increasing prices of other groups Applies a general tariff outside specific categories
Frequently Asked Questions
What does a 2.7% rise in CPI mean for American consumers? Higher-than-expected inflation means increased living costs, and consumers need to prepare their finances more carefully to cope with rising prices. Why does housing affect inflation the most? Housing accounts for a significant share of the consumer basket, with rising rents and related services leading to a strong increase in the overall price index. How much could tariffs increase inflation? High import taxes raise the cost of goods, putting pressure on consumer prices and potentially leading the Fed to maintain tighter monetary policy for longer. How do new U.S. tax policies affect global trade relations? Imposing high tariffs and threatening tax increases erodes trade relations, causing partners to retaliate, thus increasing global economic instability. How will the Fed respond to the rising CPI situation? Although the CPI is above the target, the Fed may choose to gradually lower interest rates as short-term pressures tend to stabilize, and U.S. economic expectations remain fairly positive.
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