Spencer Platt/Getty Images
The year-over-year inflation rate climbed to 2.7% in June from 2.4% in May, surpassing the 2.6% expected.
That means that the inflation rate sped up for the second straight month and is getting further away from the Federal Reserve’s target of 2%.
The new Bureau of Labor Statistics report comes as businesses brace for potential new tariffs. President Donald Trump once again delayed wide-ranging higher tariff rates that were scheduled to go into effect on July 9. However, Trump sent letters to countries like Japan, South Africa, and Indonesia, stating that their tariffs would start on August 1. Other tariffs, like those on steel and autos, have been in effect.
“The staggered implementation of tariffs should prevent a single month with spiking prices and instead, we can expect this to be the first reading of multiple that shows higher, but not alarmingly high, price increases,” Chris Hodge, head economist of the US at Natixis CIB Americas, said in a commentary ahead of the new data.
Alberto Musalem, president of the Federal Reserve Bank of St. Louis, said last week it’s too soon to know whether tariffs will have a temporary or persistent effect on inflation. New York Fed’s survey of consumer expectations showed median household expectations for inflation one year ahead slowed from 3.6% in March and April to 3.2% in May and 3% in June.
The next Federal Open Market Committee meeting is in two weeks, in which members will discuss what to do with interest rates based on inflation, the job market, and other data. Before the new inflation report, CME FedWatch showed, based on interest rate traders, that there’s an overwhelming chance the Federal Reserve will hold interest rates steady. Data published at the start of July showed unemployment is still fairly low and even fell from 4.2% to 4.1% in June. However, labor force participation also dropped, wage growth cooled, and long-term unemployment rose.
This is a developing story. Please check back for updates.
The post Inflation surged more than expected in June appeared first on Business Insider.
