U.S. Consumer Prices Rise Moderately; Tariffs Seen Fanning Inflation

  • U.S. consumer prices increased less than expected in May as cheaper gasoline partially offset higher rents, but inflation is expected to accelerate in the coming months on the back of the Trump administration's import tariffs.
  • The Consumer Price Index (CPI) increased 0.1% last month after rising 0.2% in April, the Labour Department's Bureau of Labour Statistics (BLS) reported on June 11, 2025. The monthly increase was slightly below economists' expectations, as those surveyed by Reuters and Dow Jones had predicted a 0.2% rise in the CPI. In the 12 months through May, annual CPI advanced 2.4% after gaining 2.3% in April.
  • A 0.3% increase in the cost of shelter, mostly rents, was the main driver for the rise in the CPI. The ongoing decline in energy prices also helped offset some of the increases. Furthermore, several other important items, namely vehicles and apparel prices, expected to show tariff-related jumps, posted declines.
  • Excluding food and energy, the core CPI came in respectively at 0.1% and 2.8%, compared with forecasts for 0.3% and 2.9%. Officials consider core a better measure of long-term trends, with several expressing concerns recently over the impact that tariffs would have on inflation.
  • The Federal Reserve (Fed), however, tracks different inflation gauges, including the core Personal Consumption Expenditures (PCE) price index, for its 2% target. Economists estimated core PCE inflation rose 0.2% in May after edging up 0.1% in April. That would raise the annual increase in core inflation to 2.6% from 2.5% in April.
  • In addition to pre-tariff inventory levels, economists suggest that the uncertain demand environment likely caused some businesses to hesitate before raising prices. They anticipate that inflation will accelerate from June onward and continue into the second half of the year, with companies likely increasing prices gradually to prevent sudden price shocks for consumers and to avoid drawing the White House's scrutiny.

(Sources: Reuters & CNBC)