Inflation Dynamics: Tariffs vs. Core Consumer Prices
US inflation remained steady, while underlying inflation hit a five-month high. Tariffs increased costs for imported goods, but gas and groceries became cheaper. Consumer prices were up 2.7% year-on-year in July. The Federal Reserve faces pressure on interest rate decisions as inflation remains stubbornly high.
- Country:
- United States
In the United States, inflation remained unchanged last month, yet the underlying inflation metric climbed to its peak in five months. This rise has been attributed to tariffs that have escalated the costs of imported goods, counterbalanced by cooled gas and grocery prices.
The Labor Department reported on Tuesday that consumer prices were 2.7% higher in July compared to a year ago, unchanged from June but an increase from April's 2.3%. When excluding food and energy sectors, core prices increased by 3.1% from 2.9% in June, suggesting that reduced rental cost growth and cheaper gas are balancing some impacts from tariffs.
The Federal Reserve is under pressure, as high inflation persists while job growth falters following April's tariff announcements. The market anticipates a potential rate cut, though Fed Chair Jerome Powell has cautioned against exacerbating inflation, causing tension with President Trump who urges for lower borrowing rates.
(With inputs from agencies.)
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