Inflation holds steady as data shows how prices are faring after Trump's ‘Liberation Day' tariffs
Consumer prices rose 0.1 percent on a monthly basis in May, while annual inflation stood at 2.4 percent, according to the Department of Labor's consumer price index. Last month, the year-long inflation stood at 2.3 percent.
The report captures the period after Trump unveiled his global reciprocal tariffs in April and provides some insight as to whether businesses are bearing the brunt of the duties themselves or passing them on to customers.
Trump touted the figures as a success and called on the Federal Reserve to lower interest rates. 'CPI JUST OUT. GREAT NUMBERS! FED SHOULD LOWER ONE FULL POINT,' the president said on Truth Social Wednesday. 'WOULD PAY MUCH LESS INTEREST ON DEBT COMING DUE. SO IMPORTANT!!!'
While analysts predicted a bigger increase, some still warned that the future is uncertain because tariffs keep changing.
'So far, inflation risks from higher tariffs are subdued,' Win Thin, global head of markets strategy at Brown Brothers Harriman, told Bloomberg. 'Nonetheless, U.S. protectionist trade policy and uncertainty about the ultimate level of tariffs are downside risks to growth and upside risk to inflation. Bottom line: the fundamental USD downtrend is intact.'
The stock markets responded positively to the news with all the major indexes pointing up to start the trading day.
Since Trump announced his global reciprocal tariffs and the stock market was spooked, many of the duties were paused. However, 10 percent tariffs for most countries remain.
Inflation has been slow to respond to the tariffs as most retailers are selling merchandise accumulated before the import duties took effect.
Economists said that the reduction in the scale of some trade tariffs may have 'helped to restrain cost increases thus far,' Wells Fargo's Sarah House and Nicole Cervi said. 'That said, as the higher tariff regime persists, shielding consumers from the costs is likely to become more challenging,' the economists added.
'Only a few goods prices likely rose as a result of the new tariffs in May,' Pantheon Macroeconomics economists Samuel Tombs and Oliver Allen said in a note, Bloomberg reports. 'June will be a different story — while some providers of discretionary services probably cut prices or kept them low to sustain demand.'
Walmart warned customers last month that they could see price rises because of the trade tariffs. The retailer's chief financial officer John David Rainey said that the tariffs are 'still too high.'
'It's more than any supplier can absorb. And so I'm concerned that consumer is going to start seeing higher prices,' he said. 'You'll begin to see that, likely towards the tail end of this month, and then certainly much more in June.'
Reuters contributed reporting
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