June CPI Expected to Rise 0.23% as Tariffs Drive Inflation

An analyst has suggested that after several months of low inflation, U.S. consumers may experience a slight acceleration in price surges in June. This is due to businesses beginning to pass on the increased costs of imported goods, resulting from tariffs, to consumers. Surveys of economists indicate that prices of goods and services, excluding the more volatile costs of food and energy, are expected to rise by 0.3% in June, marking the largest increase in five months. The core Consumer Price Index (CPI) in May only saw a marginal 0.1% increase. While the report scheduled for release next Tuesday may only reflect a slight pass-through of U.S. import tariffs costs to consumers, many economists expect that inflation will gradually pick up over time. At the same time, many businesses are hesitant to raise prices as U.S. consumers, facing a cooling job market, are more focused on spending restraint, creating a delicate balance.

The June 2025 Consumer Price Index (CPI) report is anticipated to reveal an acceleration in inflation, driven by the recent tariffs implemented. Economists predict that the tariffs will exert upward pressure on prices, particularly for core goods and services excluding housing. This development has been eagerly awaited by investors who have been preparing for the potential economic slowdown caused by rising prices and decreased demand. The consensus among economists is that consumer prices are expected to rise by 0.23% on a monthly basis and 2.6% annually. Core inflation, which excludes volatile food and energy prices, is forecasted to increase by 0.30% monthly and 3.0% annually. These projections, if realized, would mark a significant shift from the softer inflation data observed in May. Analysts are particularly focused on the impact of tariffs on core goods prices, which are expected to drive the acceleration in inflation. Additionally, there is an anticipated uptick in prices for services such as hotels, airfares, and medical services.

The Federal Reserve has been closely monitoring these developments, as the tariffs complicate their decision-making process regarding interest rates. While the Fed has maintained steady interest rates throughout 2025, bond futures markets indicate a 60% probability of an interest rate cut in September. This likelihood is influenced by the potential for inflation to exceed the Fed's target, which could prompt more dovish members of the Federal Open Market Committee to advocate for a rate cut. Economists from various institutions have highlighted that the rise in core goods prices will be a primary driver of inflation in June. This is attributed to broad-based price hikes resulting from tariffs. However, there are also expectations of falling shelter prices, which could offset some of the inflationary pressure. Additionally, the automotive sector is anticipated to exert downward pressure on inflation, as sellers have not yet been able to pass on the higher tariff costs to consumers. This is due to the moderation in demand for cars following the initial surge in March and April.

The upcoming CPI report, scheduled for release on July 15, 2025, at 8:30 a.m. Eastern time, will provide crucial insights into the inflationary trends. The report is expected to show a 0.23% increase in the CPI for June, following a 0.10% rise in May. Core CPI is forecasted to rise by 0.30% in June, up from 0.10% in May. On an annual basis, the CPI is projected to increase by 2.6% in June, compared to 2.4% in May, while core CPI is expected to rise by 3.0% annually, up from 2.8% in May. The impact of tariffs on inflation is expected to peak in the fourth quarter of 2025 and then lessen in 2026. This timeline is based on the anticipation that the full effects of the tariffs will take time to manifest in the economy. The Federal Reserve's decision on interest rates will be influenced by the June CPI data, with a lower-than-expected inflation rate potentially increasing the odds of a rate cut in September. Analysts suggest that inflation closer to 0.20% on a monthly basis could sway more dovish members of the Federal Open Market Committee to support a rate cut.