U.S. inflation ticked up in June as core prices remain sticky

© Ink drop - stock.adobe.com

Inflation accelerated slightly in June, with the Consumer Price Index (CPI) rising 0.3% on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported Tuesday. The year-over-year inflation rate reached 2.7%, up from 2.4% in May, signaling renewed price pressures across key categories.

Core inflation — which excludes food and energy — increased 0.2% on the month and 2.9% year over year. That marks the highest annual gain since February and complicates the Federal Reserve’s path forward as it aims to ease interest rates without fueling price growth.

Shelter remained a dominant force in inflation, climbing 0.2% in June. The rent index rose 0.2%, while owners’ equivalent rent increased 0.3%. Lodging away from home declined 2.9%, but the overall shelter index is up 3.8% over the past year.

Health care prices continued to edge upward. The medical care services index rose 0.6% in June, with hospital services up 0.7% and physician services up 0.2%. The medical care commodities index increased 0.1% on the month. Year over year, medical care services have risen 3.4% hospital services 4.2% and physician services 3.0%.

Tariffs adding pressure across categories

Household furnishings and operations increased 1.0% in June, and appliance prices jumped 1.9%, reflecting early effects of renewed tariffs on imported goods. Apparel prices also rose 0.4%.

Food prices climbed 0.3% in June and 3.0% year over year. Grocery prices were led by a 2.0% increase in beef, 2.2% in coffee and 0.9% in fruits and vegetables, while egg prices fell 7.4%. Food away from home rose 0.4%.

Energy prices increased 0.9% for the month, reversing a 1.0% decline in May. Gasoline rose 1.0%, electricity prices rose 1.0% and piped natural gas was up 0.5%. However, energy prices are still down 0.8% from a year earlier, with gasoline prices 8.3% lower than June 2024.

Outlook: Fed likely to hold

The Federal Reserve is expected to maintain interest rates at its July 30-31 meeting, as inflation remains above target and core prices show limited signs of softening.

Although President Donald J. Trump has publicly pushed for sharp rate cuts, the latest CPI data suggests the central bank will stick with its cautious approach. Following Tuesday’s CPI release, Trump took to Truth Social to demand action, writing: “Consumer Prices LOW. Bring Down the Fed Rate, NOW!!!”

In a separate post, he added, “Fed should cut Rates by 3 points. Very Low Inflation. One Trillion Dollars a year would be saved!!!”

Kathy Jones, chief fixed-income strategist at Charles Schwab, told The New York Times that the latest data is “another blow to any hopes for a Fed rate cut in the near term. They want to see inflation nearing the 2% target, and this doesn’t particularly help.”

Until inflation shows clearer signs of deceleration or the labor market weakens substantially, most policymakers appear in no rush to shift course.