Chart Of The Day

Inflation accelerated in June as President Trump’s tariffs started to leave a bigger imprint on the economy, keeping the Federal Reserve on track to hold interest rates steady when policymakers next meet this month.

The Consumer Price Index rose 2.7 percent from a year ago, the swiftest pace since February, data released by the Bureau of Labor Statistics today. That is slightly higher than expected and is up from an annual pace of 2.4 percent in May.

“Core” inflation, which strips out volatile food and energy prices and is seen as a reliable gauge for underlying price pressures, also shifted higher. Those prices were up 2.9 percent from the same time last year.

Over the course of the month, prices rose 0.3 percent, a notable pickup from a 0.1 percent increase in May. Core prices rose 0.2 percent.

The absence of tariff-related inflation has been a point of pride for the White House and has provided cover for Trump’s critique of Fed Chairman Powell’s approach to monetary policy. If June’s CPI contains evidence that prices are in fact climbing due to import duties, it would weaken the case Trump and his allies have been building against Powell and his wait-and-see approach.

Most economists still expect inflation to rise over the course of the summer.  And with a barrage of new, so-called reciprocal levies and an eye-popping 50 percent tariff on copper set to take effect on August 1, any hint of tariff-related inflation could portend additional price surges later this year. The Yale Budget Lab on Monday estimated that consumers face an overall effective tariff rate of 20.6 percent — the highest since 1910.  In dollar terms this is the equivalent of an average per household income loss of $2,800.

“This tariff policy is going to result in higher prices and fewer goods available for people to buy,” said Norbert Michel, the vice president and director of the Cato Institute’s Center for Monetary and Financial Alternatives.  “That's a supply shock. It’s not a win. And it's not something that monetary policy is any good at dealing with.”