U.S. Core CPI Below Expectations, Raising Concerns Over Fed Rate Cut Disagreement
Affected by falling car prices, the U.S. core CPI has seen its increase fall below expectations for the fifth consecutive month. Specific data shows that categories heavily impacted by tariffs, such as toys, furniture, home appliances, and clothing, have performed strongly, indicating that companies have started to pass on higher import costs to consumers. Meanwhile, prices for new and used cars have declined. The lower-than-expected core CPI has raised questions about the extent to which tariffs introduced by Trump will impact consumer prices. Some businesses have protected consumers from these impacts by stockpiling inventory before the taxes took effect or absorbing some of the extra costs at the expense of lower profit margins. This lower-than-expected data could lead Trump to more strongly call for a rate cut from the Federal Reserve. Although some officials have expressed a willingness to cut rates at the meeting in two weeks, policymakers remain divided on whether tariffs will cause a one-time price shock or have more lasting effects, and thus may again keep interest rates unchanged.
