The Big Money Show hosts talk the Federal Reserves handling of monetary policy and the fate of Jerome Powells role as Fed chair.
Inflation increased in June and moved further away from the Federal Reserve’s target rate as central bank policymakers prepare to meet later this month amid President Donald Trump’s calls for interest rate cuts.
The Bureau of Labor Statistics on Tuesday said that the consumer price index (CPI) – a broad measure of how much everyday goods like gasoline, groceries and rent cost – rose 0.3% in June compared with last month, while it was up 2.7% on an annual basis. Those figures were slightly higher than the estimate of economists polled by LSEG.
Both marked accelerations from last month, when the monthly increase was 0.1% and the annual figure was 2.4%.
So-called core prices, which exclude more volatile measurements of gasoline and food to better assess price growth trends, were up 0.2% from the prior month and 2.9% from a year ago. Those figures were slightly cooler than economists’ expectations. As with the headline number, the core numbers ticked higher compared with May, when inflation rose 0.1% on a monthly basis and 2.8% on an annual basis.
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High inflation has created severe financial pressures for most U.S. households, which are forced to pay more for everyday necessities like food and rent. Price hikes are particularly difficult for lower-income Americans, because they tend to spend more of their already-stretched paychecks on necessities and have less flexibility to save money.
Food prices rose 0.3% in June from the prior month and were 3% higher on an annual basis. The food at home index rose 0.3% in June from a month ago and is up 2.4% on an annual basis, while the food away from home index increased 0.4% on a monthly basis and is 3.8% higher than a year ago.
Egg prices declined 7.4% in June, continuing a cooling trend after the industry saw rapid price growth last year due to an avian flu outbreak, which left prices still 27.3% higher than a year ago. The index for meats, poultry and fish rose 0.8% on a monthly basis and is up 4.1% from last year. The dairy index declined 0.3% from a month ago and is up 0.9% compared with a year ago, while the fruits and vegetable index was up 0.9% in June and is 0.7% higher than last year.
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Inflation ticked higher in June, moving further from the Fed’s 2% long-run target. (Justin Sullivan/Getty Images / Getty Images)
Energy prices increased 0.9% in June after falling by 1% in May, driven by 1% increases in the gasoline and energy indexes last month, as well as a 0.5% increase in the natural gas index. The energy index fell 0.8% over the last year while the gasoline index is down 8.3% from a year ago, although the electricity index is up 5.8% and natural gas has risen 14.2% in the last year.
Housing prices rose by 0.2% in June and was the primary factor in driving the overall CPI increase. Over the last year, the shelter index increased 3.8%.
Transportation costs rose 0.2% on a monthly basis and are 3.4% higher than a year ago. Airline fares declined 0.1% for the month and are down 3.5% compared with a year ago, while motor vehicle insurance rose 0.1% on a monthly basis and is 6.1% higher than last year.
The June CPI report comes as the Federal Reserve is weighing the timing of interest rate cuts against signs of tariffs contributing to higher consumer prices.
Fed Chair Jerome Powell recently indicated that the central bank would likely have cut interest rates earlier this year if not for uncertainty created by the Trump administration’s tariff policies, adding that central bank policymakers will continue to monitor economic data as they consider monetary policy shifts.
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President Trump has repeatedly criticized Fed Chair Powell, who he appointed to the role in 2017. ( SAUL LOEB/AFP via Getty Images / Getty Images)
“Inflation has begun to show the first signs of tariff pass-through,” said Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management. “While services inflation continues to moderate, the acceleration in tariff-exposed goods in June is likely the first of greater price pressures to come. The Fed will want to hold steady as it awaits more data.”
“While today’s CPI release showed some early signs of tariff impact, on the whole underlying inflation remained muted,” said Kay Haigh, global co-head of fixed income and liquidity solutions in Goldman Sachs Asset Management. “Price pressures, however, are expected to strengthen over the summer and the July and August CPI reports will be important hurdles to clear. For the time being the Fed remains in wait and see mode. Should underlying inflation, however, continue to prove benign the path remains open to a resumption of the Fed’s easing cycle in the autumn.”
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The June CPI inflation report solidified the market’s view that the Fed won’t cut interest rates this month. The probability of the benchmark federal funds rate remaining at the current range of 4.25% to 4.5% rose from 93.8% yesterday to 97.4% today, according to the CME FedWatch tool. Similarly, the probability of rates being held steady after the Fed’s September meeting also ticked higher from 37.4% yesterday to 42.2% following today’s report.
