The tariff-driven US inflation that economists feared begins to emerge

By CHRISTOPHER RUGABER and JOSH BOAK Associated Press WASHINGTON Inflation rose last month to its highest level since February as President Donald Trump s sweeping tariffs push up the cost of a range of goods including furniture clothing and large appliances Consumer prices rose in June from a year earlier the Labor Department declared Tuesday up from an annual increase of in May On a monthly basis prices climbed from May to June after rising just the previous month Related Articles US imposes a duty on fresh Mexican tomatoes in hopes of boosting domestic production Trump s tariff on Brazilian goods like coffee and orange juice could drive up US breakfast costs PG E committing million to financial assistance programs Bird flu crisis response ends in US as infections decline Trump tariffs hike prices at downtown San Jose farmers domain Worsening inflation poses a political challenge for Trump who promised during last year s presidential campaign to this instant lower costs only to engage in a whipsawed frenzy of tariffs that have left businesses and consumers worried Trump has already declared that the U S effectively has no more inflation as he has attempted to pressure Federal Reserve Chair Jerome Powell into cutting short-term interest rates Yet the bump in inflation last month makes it more likely that the central bank will keep rates unchanged at the central bank s next meeting in two weeks Powell has noted that he wants to see how the market system reacts to Trump s duties before reducing borrowing costs Excluding the volatile food and capacity categories core inflation increased in June from a year earlier up from in May On a monthly basis it picked up from May to June Economists closely watch core prices because they typically provide a better sense of where inflation is headed The uptick in inflation was driven by a range of higher prices The cost of gasoline rose just from May to June while grocery prices increased Appliance prices jumped for the third straight month Toys clothes audio equipment shoes and sporting goods all got more expensive and are all heavily imported You are starting to see scattered bits of the tariff inflation regime filter in announced Eric Winograd chief economist at asset management firm AllianceBernstein who added that the cost of long-lasting goods rose last month compared with a year ago for the first time in about three years Winograd also noted that housing costs one of the biggest drivers of inflation since the pandemic has continued to cool which is holding down broader inflation The cost of rent rose in June compared with a year ago the smallest yearly increase since late Were it not for the tariff uncertainty the Fed would already be cutting rates Winograd noted The question is whether there is more to come and the Fed clearly thinks there is along with bulk economists Stock prices were mixed early with the S P and Nasdaq indexes rising and the Dow Jones falling points Specific investors were cheered by the fact that core prices rose less than forecast Certain items got cheaper last month including new and used cars hotel rooms and air fares Expedition prices have generally declined in up-to-date months as fewer international tourists visit the U S The analysis set up a broader political battle over Trump s tariffs a fight that will ultimately be determined by how the U S inhabitants feels about their cost of living and whether the president is making good on his promise that his agenda would help the middle class The White House pushed back on proposes that the review exhibited a negative impact from tariffs since the cost of new cars were down despite the tariffs on autos and tariffs on steel and aluminum The administration also noted that despite the June bump in apparel prices clothing prices are still cheaper than they were three months ago Consumer Prices LOW Trump posted on Truth Social Bring down the Fed Rate NOW For Democratic lawmakers the inflation overview authenticated their warnings over the past several months that Trump s tariffs would push up inflation Their argument on Tuesday was that the situation will likely get even more painful given the size of the tariff rates in the letters that Trump posted over the past week For those saying we have not seen the impact of Trump s tariff wars look at the present day s material Americans continue to struggle with the costs of groceries and rent and now prices of food and appliances are rising declared Sen Elizabeth Warren D-Mass Families were already getting crushed and the president s making it worse Trump has imposed sweeping duties of on all imports plus on goods from China Just last week the president threatened to hit the European Union with a new tariff starting Aug He has also threatened to slap duties on Brazil which would push up the cost of orange juice and coffee Orange prices leaped just from May to June and are higher than a year ago the leadership reported Tuesday Overall grocery prices rose last month and are up from a year earlier While that is a much smaller annual increase than before the pandemic it is slightly bigger than the pre-pandemic pace of food price increases The Trump administration has also placed a duty on Mexican tomatoes The acceleration in inflation could provide a respite of sorts for Fed Chair Powell who has come under increasingly heavy fire from the White House for not cutting the benchmark interest rate The Fed chair has mentioned that the duties could both push up prices and slow the business activity a tricky combination for the central bank since higher costs would typically lead the Fed to hike rates while a weaker business activity often spurs it to reduce them Trump on Monday announced that Powell has been terrible and doesn t know what the hell he s doing The president added that the economic system was doing well despite Powell s refusal to reduce rates but it would be nice if there were rate cuts because people would be able to buy housing a lot easier Last week White House executives also attacked Powell for cost overruns on the years-long renovation of two Fed buildings which are now slated to cost billion roughly one-third more than originally budgeted While Trump legally can t fire Powell just because he disagrees with his interest rate decisions the Supreme Court has signaled he may be able to do so for cause such as misconduct or mismanagement Selected companies have disclosed they have or plan to raise prices as a impact of the tariffs including Walmart the world s largest retailer Automaker Mitsubishi mentioned last month that it was lifting prices by an average of in response to the duties and Nike has reported it would implement surgical price hikes to offset tariff costs But a great number of companies have been able to postpone or avoid price increases after building up their stockpiles of goods this spring to get ahead of the duties Other firms may have refrained from lifting prices while they wait to see whether the U S is able to reach agreement deals with other countries that lower the duties