US Consumer Inflation Tame for Now, Tariff Risks Loom

The U.S. consumer price index experienced a small increase during May which indicates that current inflation remains under control despite President Trump's extensive tariffs that will probably increase prices throughout the year. The Labor Department announced on Wednesday that Consumer Price Index (CPI) increased 0.1% in May because lower gasoline prices balanced out the rise in housing expenses.

The core CPI which excludes food and energy costs increased 0.1% in May after showing a 0.2% rise in April. The main driver of price growth came from rising shelter expenses including rent costs while grocery prices started to increase after two months of decline.

The annual CPI index increased to 2.4% in May compared to 2.3% in April yet failed to meet market predictions of 2.5%. The current low inflation rate will face a potential increase due to Trump's import tariffs which businesses will need time to adapt to the new tax system.

The main obstacle to price stability comes from rising costs caused by tariffs according to Daniel Hornung who serves as an MIT senior fellow. The Federal Reserve will maintain its interest rates during the upcoming week according to market expectations while some traders predict rate cuts will occur during the second half of the year if tariffs create economic slowdown.