Trump is misleading the American people
Scott Bessent's comment was also incorrect, or at least misleading, as was a Truth Social post by Trump that said inflation was very low and the Federal Reserve Board should cut US interest rates by three percentage points.
While the annualised headline inflation rate of 2.7 per cent in June was in line with expectations and the 'core' rate of 2.9 per cent, which excludes volatile food and energy prices, was also as forecast, there were clear early signs that the tariffs are flowing through to prices.
Those sectors that are most tariff-exposed – fresh fruit and vegetables, household appliances and furniture, toys, clothing and sporting goods – all experienced prices increases.
Appliance prices rose the most since 2020, toys the most since early 2021 and sports equipment and household furnishings the most in three years. The price of oranges was up 4.7 per cent, olives 4.4 per cent and coffee (before the 50 per cent tariff on Brazilian imports) 2.2 per cent.
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If cars (where prices fell, perhaps because consumers brought forward purchases) were excluded, the increase in core goods prices of 0.55 per cent was the biggest monthly rise since the late 2021 through to mid-2022 period, when the US inflation rate was soaring as the supply shocks from the pandemic hit.
The trend is definitely not Trump's friend. In the year to April, the inflation rate was 2.3 per cent. It edged up to 2.4 per cent in May. Now it's 2.7 per cent. If inflation in the three months to June were annualised the rate would be 2.4 per cent against the 1.7 per cent experienced in the three months to May.
US inflation is, therefore, rising, not falling, and moving away from the Fed's target of 2 per cent.
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