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Japan Today
6 days ago
- Business
- Japan Today
U.S. consumer inflation holds steady but tariff risks persist
The consumer price index rose 2.7 percent from a year ago in July, slightly below the 2.8 percent that analysts expected By Beiyi SEOW U.S. consumer inflation held steady in July, with an uptick in underlying price pressures that could spell trouble for President Donald Trump and his promises of an economic boom. The 2.7 percent consumer price index (CPI) figure was probably not high enough to derail a potential interest rate cut in September, but Trump responded with yet another direct attack on Federal Reserve chair Jerome Powell, whom he blames for not lowering rates fast enough. In a separate Truth Social post, Trump claimed that "even at this late stage, Tariffs have not caused Inflation." But analysts warn that the pass-through from Trump's duties is not yet complete. CPI rose 2.7 percent from a year ago in July, the same rate as in June, said the Department of Labor on Tuesday. But, excluding the volatile food and energy segments, "core" CPI in July accelerated to 0.3 percent on a month-on-month basis, up from a 0.2-percent rise before. From a year ago, underlying inflation rose 3.1 percent, picking up pace too from 2.9 percent in June. "Many companies have announced plans to pass along higher costs to their customers soon," said Navy Federal Credit Union chief economist Heather Long. "It's only a matter of time before more goods become more expensive," she added in a note. Analysts are closely watching CPI numbers amid increasing fears over the reliability of economic data from the Trump administration, which fired the head of the Bureau of Labor Statistics recently after a jobs report showed significantly lower hiring numbers. They are also monitoring for weakening amid Trump's trade war, as he tries to reshape the global economy. The president has ordered a 10-percent tariff on goods from almost all trading partners. For dozens of economies including Japan, South Korea and the European Union, this level rose to various higher rates last Thursday. Sectors that have been targeted individually -- or are under investigation by officials -- have been spared from these countrywide levies so far. But Trump has been progressively imposing steep duties on different sectors. "Brace for more price hikes as we move into late summer and early fall," said KPMG chief economist Diane Swonk. "The pass-through of the most recent rise in tariffs is expected to be faster than the initial round because there was less time to stockpile," she added. While Swonk believes a September interest rate cut remains possible, she expects this would only happen if "if we see much weaker demand, notably from the labor market, between now and then." CME's FedWatch tool has investors seeing a 92.2-percent chance of a quarter-point cut at the Fed's next policy meeting in September. On Tuesday, Trump said he was considering allowing "a major lawsuit against" Powell to proceed, taking aim at the Fed chair's oversight of the central bank's renovations in Washington. Trump has repeatedly lashed out at Powell recently, floating the idea of ousting him over the Fed's revamp, as he criticized the bank's decisions to keep rates unchanged this year. Tuesday's headline CPI figure was a touch below the 2.8-percent rate expected in a median forecast of analysts surveyed by Dow Jones Newswires and The Wall Street Journal. But experts have cautioned that a cooler figure could also point to a slowing economy. For now, policymakers are trying to balance between supporting the jobs market and keeping cost increases under control. While businesses have stocked up in anticipation of Trump's tariff hikes this year and may not have raised consumer costs directly, economists warn that companies will not be able to do so indefinitely. While the indexes for energy and gasoline dropped in the month, shelter costs rose in July. Indexes that rose over the month included medical care, airline fares and household furnishings, the Labor Department report showed. "It remains the case that prices have risen the most since January for goods that are primarily imported," said Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics. © 2025 AFP
Japan Today
28-06-2025
- Business
- Japan Today
U.S. inflation edges up as Trump renews criticism of Fed chief
The Federal Reserve's preferred inflation gauge rose 2.3 percent in May, but consumer spending pulled back in part due to autos By Beiyi SEOW The U.S. Federal Reserve's preferred inflation measure logged a mild uptick Friday while spending weakened, triggering another tirade by President Donald Trump against the central bank chair for not cutting interest rates sooner. "We have a guy that's just a stubborn mule and a stupid person," Trump told an event at the White House, referring to Fed Chair Jerome Powell. "He's making a mistake." With Powell's term as Fed chief coming to an end next year, Trump hinted at his choice of successor: "I'm going to put somebody that wants to cut rates." The president's remarks came after government data showed the personal consumption expenditures (PCE) price index climbing 2.3 percent last month from a year ago in May. This was in line with analyst expectations and a slight acceleration from April's 2.2 percent increase, but still a relatively mild uptick. Excluding the volatile food and energy sectors, the PCE price index was up 2.7 percent, rising from April's 2.6 percent uptick, the Commerce Department's report showed. But consumer spending declined, after Trump's fresh tariffs in April dragged on consumer sentiment. PCE dropped by 0.1 percent from the preceding month, reversing an earlier rise. While Trump has imposed sweeping tariffs on most U.S. trading partners since returning to the White House in January -- alongside higher rates on imports of steel, aluminum and autos -- these have had a muted effect so far on inflation. This is in part because he held off or postponed some of his harshest salvos, while businesses are still running through inventory they stockpiled in anticipation of the levies. But central bank officials have not rushed to slash interest rates, saying they can afford to wait and learn more about the impact of Trump's recent duties. They expect to learn more about the tariffs' effects over the summer. "The experience of the limited range of tariffs introduced in 2018 suggests that pass-through to consumer prices is intense three-to-six months after their implementation," warned economists Samuel Tombs and Oliver Allen of Pantheon Macroeconomics in a note. They flagged weakness in consumer spending, in part due to a pullback in autos after buyers rushed to get ahead of levies. And spending on services was tepid even after excluding volatile components, they said. "There has also been a clear weakening in discretionary services spending, notably in travel and hospitality," said Michael Pearce, deputy chief US economist at Oxford Economics, in a note. This reflects "the chilling effect of the plunge in consumer sentiment," he added. Between April and May, the PCE price index was up 0.1 percent, the Commerce Department report showed. As a July deadline approaches for higher tariff rates to kick in on dozens of economies, all eyes are also on whether countries can reach lasting trade deals with Washington to ease the effects of tariffs. For now, despite the slowing in economic growth, Pearce said risks that inflation could increase will keep the Fed on hold with interest rates "until much later in the year." © 2025 AFP
