U.S. inflation in June rose moderately to 2.7%, with core inflation remaining sticky.

The US inflation data for June shows a moderate rebound, with the overall CPI rising 0.3% month-on-month and a year-on-year growth rate of 2.7%, reaching a four-month high, but still in line with market expectations.

The core CPI indicator, after excluding the volatile prices of food and energy, showed a slight month-on-month increase of 0.2%, with the annual rate rising to 2.9%, in line with expectations.

Previously, the inflation rate had been on a downward trend throughout the year, with the overall CPI year-on-year rate at 3% in January. Although there were concerns that Trump's trade war would drive up prices, the inflation rate's rise gradually slowed in the following months. Tariff policy is a key influencing factor. Although the data in June did not show consistent price impacts across various industries, there are signs that tariffs are driving up overall figures. Due to the tariff policies implemented by the Trump administration, clothing prices rose by 0.4% in June, while home goods recorded a significant increase of 1%; However, the prices of new cars and used cars have decreased by 0.3% and 0.7% respectively, reflecting the differences in the ability of various industries to transmit cost pressures.

Average CPI of all cities in the United States | Source: U.S. Bureau of Labor Statistics Among them, housing costs continue to be the main driver. Although it only rose 0.2% month-on-month, the year-on-year increase reached 3.8%, continuing to support the overall price level. Dan North, an economist at Allianz Trade, pointed out that current data has not yet fully reflected the impact of tariffs, but the cost transfer is just a matter of time. This structural differentiation creates a more complex decision-making environment for policymakers, particularly when energy prices rebound by 0.9% and medical service costs rise by 0.6%, while real hourly wages adjusted for inflation have decreased by 0.1% compared to the previous month. These data underscore that consumers' purchasing power is facing new challenges. Discrepancies in policy and their impact on financial markets President Trump has previously voiced on social media, strongly urging the Federal Reserve to immediately cut interest rates by 3 percentage points, claiming that this move could save trillions of dollars in spending each year. However, the Federal Reserve clearly maintains its policy discipline, and the market generally expects it to keep interest rates unchanged at its July meeting, with a mild rate cut of 25 basis points possibly not occurring until September.

This policy divergence stems from the starkly different assessments of the economic situation by both parties. The White House believes that tariffs have not exacerbated inflation, and the current level of inflation provides ample space for interest rate cuts, which can be implemented immediately; whereas the Federal Reserve believes that the current state of the U.S. economy is strong enough to wait and observe the impact of tariffs on inflation before taking action on interest rate cuts. It is worth noting that the financial market reacted relatively calmly to this inflation report, with limited fluctuations in stock market futures and government bond yields, reflecting that investors have already digested the uncertainty of the inflation path. Conclusion: In summary, behind this seemingly stable data lies an important turning signal. If the transmission effect of tariffs on prices becomes more apparent in the coming months, the current inflation level of 2.7% may just be the beginning of a new round of price rise cycle. This potential change will also force the Federal Reserve to make more difficult policy choices between controlling inflation and maintaining economic growth, and whether to cut interest rates in September will become a key moment to observe its policy direction. #CPI # tariff #interest rate cut expectation