Tariffs Drive U.S. Inflation Higher in June

The United States experienced rising inflation during June because of tariffs that increased import prices which makes it harder for the Federal Reserve to achieve lower interest rates. The personal consumption expenditures (PCE) price index which serves as the Federal Reserve's preferred inflation indicator experienced its largest 0.3% increase since January.

The Commerce Department published the report which demonstrated price increases in furniture and clothing and recreational goods together with a 0.9% increase in energy prices. The price of durable household items experienced its biggest increase since February 2021 when they rose 1.3%.

The PCE index showed a 2.6% annual increase during the last month after reaching 2.4% in May. The core inflation rate which excludes food and energy costs increased by 0.3% because of rising healthcare and financial services expenses.

The Federal Reserve maintained its interest rates between 4.25%-4.50% during the previous day. Fed Chair Jerome Powell failed to indicate any upcoming rate reduction because he emphasized ongoing inflationary threats. Market predictions about a September interest rate reduction have disappeared since then.

Economists predict that Trump administration tariffs will drive up production costs because Procter & Gamble has already started increasing its prices. The inflation rate is expected to continue rising throughout the year which might delay rate cuts until October or beyond.