CPI report reveals inflation crept higher in May as tariffs threaten prices

USA Today

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CPI report reveals inflation crept higher in May as tariffs threaten prices
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Couples brace for higher wedding costs as tariffs loom
Weddings are already a huge expense, but they could get pricier as tariffs bump up dress and flower costs.
Inflation ticked higher in May but was more stable than expected as another drop in gasoline prices was partly offset by the early effects of President Donald Trump's wide-ranging tariffs.
Consumer prices increased 2.4% from a year earlier, up from a four-year low of 2.3% the previous month, according to the Labor Department's consumer price index, a measure of average changes in goods and services costs. But the rise was was more modest than expected and resulted from a larger gap with the year-ago figure.
On a monthly basis, costs increased just 0.1%, less than expected, after rising 0.2% in April.
Many forecasters expected Trump's import fees to start trickling into prices last month while others figured the effects would be dampened by strategies intended to soften the blow.
What is meant by core inflation?
Core inflation, which excludes volatile food and energy items and is watched closely by the Fed because it captures longer-lasting trends, increased 0.1% after rising 0.2% in April. That kept the annual increase at a four-year low of 2.8%.
Will tariffs increase inflation?
Barclays and Goldman Sachs predicted tariffs on Chinese imports would begin pushing up the cost of goods such as household furnishings, apparel and communications equipment in May.
But Wells Fargo reckoned any price bumps would be blunted because many manufacturers and retailers stocked up on materials and products before tariffs took effect. The research firm also said many companies would absorb some of the costs or hold off on price increases as they await White House negotiations with foreign countries.
To allow for the talks, Trump paused high double-digit duties on dozens of countries for 90 days in April and similarly suspended triple-digit levies on China last month.
Still, U.S. tariffs overall have jumped from less than 3% in January to 30% on goods from China and 10% on shipments from other countries. Early this month, Trump doubled tariffs on all steel and aluminum imports to 50%.
A trade court blocked most of the fees two weeks ago but a higher court allowed them to stay in place while the administration appeals the ruling.
By year's end, Barclays estimates the charges will drive overall inflation to 3.5% and the core measure to 3.8%.