June U.S. Inflation May Have Worsened  07/15 06:11

   Inflation likely accelerated in June as sweeping tariffs on nearly all 
imports may have pushed up prices for electronics, appliances, and other goods, 
economists forecast.

   WASHINGTON (AP) -- Inflation likely accelerated in June as sweeping tariffs 
on nearly all imports may have pushed up prices for electronics, appliances, 
and other goods, economists forecast.

   Consumer prices probably rose 2.6% last month from a year ago, up from an 
annual increase of 2.4% in May, according to data provider FactSet. The Labor 
Department will issue its inflation report at 8:30 a.m. eastern. On a monthly 
basis, prices likely rose 0.3% from May to June, the largest increase since 
January, economists project.

   Worsening inflation could pose a political challenge for President Donald 
Trump, who promised during last year's presidential campaign to immediately 
lower costs. The sharp inflation spike of 2022-2023 was the worst in four 
decades and soured most Americans on former president Joe Biden's handling of 
the economy.

   Faster price increases would also likely underscore the Federal Reserve's 
reluctance to cut its short-term interest rate, as Trump is loudly demanding.

   Excluding the volatile food and energy categories, inflation is forecast to 
have risen 3% in June from a year earlier, up from a 2.8% rise in May. On a 
monthly basis, it is also expected to have picked up 0.3% from May to June, 
according to FactSet. Economists closely watch core prices because they 
typically provide a better sense of where inflation is headed.

   Trump has imposed sweeping duties of 10% on all imports, plus 50% levies on 
steel and aluminum, 30% on goods from China, and 25% on imported cars. Just 
last week the president threatened to hit the European Union with a new 30% 
tariff starting Aug. 1.

   So far, the tariffs haven't noticeably pushed up inflation, which has been 
mild for the past four months. Core inflation has fallen from 3.3% in January 
to 2.8% in May, though that is still above the Fed's 2% target. If inflation in 
June is much weaker than economists forecast, Trump will likely renew his 
demands that Federal Reserve Chair Jerome Powell immediately reduce borrowing 
costs.

   Powell and other Fed officials have emphasized that they want to see how the 
economy evolves as the tariffs take effect before cutting their key short-term 
rate. The Fed chair has said that the duties could both push up prices and slow 
the economy, a tricky combination for the central bank since higher costs would 
typically lead the Fed to hike rates while a weaker economy often spurs it to 
reduce them.

   Trump on Monday said that Powell has been "terrible" and "doesn't know what 
the hell he's doing." The president added that the economy 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 officials also attacked Powell for cost overruns on 
the years-long renovation of two Fed buildings, which are now slated to cost 
$2.5 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.

   While inflation was mild in May, there were already signs in last month's 
report that tariffs were starting to have some impact. The cost of furniture, 
appliances, toys, and tools rose, though those increases were offset by falling 
prices for airfares, hotels, and muted rises in rental costs.

   Some companies have said they have or plan to raise prices as a result of 
the tariffs, including Walmart, the world's largest retailer. Automaker 
Mitsubishi said last month that it was lifting prices by an average of 2.1% in 
response to the duties, and Nike has said it would implement "surgical" price 
hikes to offset tariff costs.

   But many 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 companies may have refrained from lifting prices while they wait 
to see whether the U.S. is able to reach trade deals with other countries that 
lower the duties.