June CPI Report Set to Release: Faster Inflation Hints Fed Likely to Hold Rates

Markets are closely watching the upcoming U.S Consumer Price Index (CPI) report for June, which could serve as a critical indicator of whether the Federal Reserve will begin cutting interest rates in July.

Consensus expectations suggest that the impact of newly imposed tariffs will begin to show in the June data, with inflation accelerating across the board. Specifically, year-over-year CPI is expected to rise by 2.6%, while month-over-month CPI is forecast at 0.3%.

Excluding the more volatile categories of food and energy, core CPI is expected to climb back above the 3% threshold year-over-year, with a monthly increase of 0.3%.

In both headline and core measures, June inflation is anticipated to accelerate relative to May.

Businesses Exhaust Options, Now Forced to Raise Prices

Most institutions believe that the effects of tariffs began to surface in June and will intensify over time. Initially, many companies tried to maintain prices by drawing on inventory or compressing profit margins. However, some firms are now out of options and have been forced to raise prices.

A May survey by the New York Fed found that roughly three-quarters of companies had raised prices due to tariffs. Toyota plans to hike prices starting in July, and retailers like Nike are eyeing price increases in the fall. In addition, the summer travel season could see strong demand for airfare and hotels, further pushing CPI upward.

Goldman Sachs Sees Stronger Tariff Impact

Goldman Sachs tracks price changes across major categories through a combination of databases and surveys. Their data shows that in June:

Used car prices fell 0.5%, Auto insurance costs rose a mild 0.3%, Airfare rebounded by 1%, Tariffs added approximately 0.08 percentage points to prices of home goods and recreational/communication products.

Goldman expects tariffs to exert even greater upward pressure on inflation in the coming months. The bank sees core CPI increasing at a monthly rate of 0.3% to 0.4%, forecasting a year-over-year core CPI of 3.1% by December 2025—compared to 2.3% without tariff effects.

What Are Analysts and Investment Banks Saying?

Nearly all major investment banks agree: a June rebound in inflation is virtually a certainty, and hopes for a July Fed rate cut are fading fast.

“Companies are still using multiple strategies to offset the impact of tariffs. We estimate tariffs contributed roughly one-third of June’s price increases,” said Gregory Daco, Chief Economist at EY-Parthenon, who warned that tariff effects will deepen with time.

Scott Anderson, Chief U.S. Economist at BMO Capital Markets, added: “President Trump is now threatening higher tariffs on multiple economies. We are still stuck in a tariff-driven inflationary environment.”