US consumer prices increase as expected in June
The US Consumer Price Index increased 0.3% last month after edging up 0.1% in May, the Labor Department's Bureau of Labor Statistics said today. That was the largest gain since January. In the 12 months to June, the CPI advanced 2.7% after rising 2.4% in May.
Economists polled Reuters had forecast the CPI would climb 0.3% and increase 2.6% on a year-over-year basis.
Inflation readings came in on the low side in February to May, leading to demands by President Donald Trump for the US Federal Reserve to lower borrowing costs.
Economists said inflation has been slow to respond to the sweeping import duties Trump announced in April because businesses were still selling stock accumulated before the tariffs came into effect.
Trump last week announced higher tariffs would come into effect on August 1 for imports from a range of countries, including Mexico, Japan, Canada and Brazil, and the European Union effective August 1, raising the effective tariffs rate. Economists expect higher goods prices to prevail through the summer.
Excluding the volatile food and energy components, the CPI rose 0.2% in June after edging up 0.1% in the prior month. In the 12 months to June, core CPI inflation increased 2.9% after rising 2.8% for three months in a row.
Strong price increases for goods, however, could be somewhat offset by moderate rises in services costs, and ease concerns of a broad-based rise in inflationary pressures. Soft demand has limited price increases for services-related categories like air fares as well as hotel and motel rooms.
The Fed tracks different inflation measures for its 2% target and it is expected to leave its benchmark overnight interest rate in the 4.25%-4.5% range at a policy meeting later this month.
Minutes of the central bank's June 17-18 meeting, which were published last week, showed only "a couple" of officials said they felt rates could fall as soon as the July 29-30 meeting.
Goldman Sachs is forecasting monthly core CPI inflation increases of between 0.3%-0.4% over the next few months, reflecting tariff-related increases in the prices of consumer electronics, autos and apparel. The investment bank expects limited near-term impact on core services inflation.
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