June CPI Expected to Rise 0.3% Due to Gasoline Costs and Tariffs

U.S. consumer prices are expected to rise in June 2025, driven by higher gasoline costs and tariff-driven price increases. This anticipated inflation uptick could delay the Federal Reserve’s plans to resume interest rate cuts, following months of relatively soft data. Economists predict that the Consumer Price Index (CPI) will increase by 0.3% in June, the largest monthly gain since January, following a 0.1% rise in May. The primary contributors to this increase are rebounding gasoline prices and costlier imported goods impacted by new tariffs.

President Donald Trump’s recent announcement of broader tariffs, set to begin in August, has put further inflationary pressure on the market. These latest duties will affect imports from various countries, including Mexico, Canada, Japan, Brazil, and the European Union. Retailers like Walmart have already warned of price hikes due to rising import costs. Economists believe the full effect of the tariffs was delayed because many firms relied on pre-tariff inventory. However, business surveys and anecdotal reports suggest inflation will accelerate through the summer and into year-end.

Sarah House, senior economist at Wells Fargo, noted that the June CPI report is likely to show inflation beginning to strengthen again, albeit not enough to alarm Fed officials at this juncture. Core inflation, which excludes food and energy, is also forecast to increase by 0.3%, the highest since January. This reflects growing prices in tariff-exposed categories such as furniture and recreational goods. Stephen Stanley, chief economist at Santander U.S. Capital Markets, said the inflation impact from tariffs “began to finally grow in frequency in June,” with more substantial effects expected in July and August. Meanwhile, services inflation has remained muted, weighed down by soft demand in categories such as airfares and hotel rates.

In the 12-month period through June, headline inflation is expected to rise to 2.7% from 2.4% in May. Core inflation is projected to tick up to 3.0% from 2.8%. Despite rising inflation, the Federal Reserve is expected to keep its benchmark rate steady in the 4.25%–4.50% range when it meets later this month. Minutes from the June 17–18 policy meeting revealed that only a few officials favored a rate cut as early as July. Veronica Clark, an economist at Citigroup, said modest services inflation suggests that “higher goods prices are not leading to broad-based inflationary pressures,” leaving the Fed room to lower rates later if necessary.

Goldman Sachs anticipates monthly core CPI increases between 0.3% and 0.4% over the coming months. They point to electronics, autos, and apparel as sectors likely to see price increases, though services inflation may remain subdued in the near term. The upcoming CPI data release is crucial as it will provide insights into the inflationary pressures building within the economy. Many economists have been anticipating that the higher tariffs imposed by the US administration would eventually translate into increased prices for consumer goods. However, this effect has not been prominently visible in the inflation data until now. The timing of the Federal Reserve's next move on interest rates will be significantly influenced by the inflation data, as it will determine whether the central bank needs to take further action to mitigate the rising inflationary pressures.