Key TakeawaysInflation accelerated in June, with the CPI rising 2.7% on an annual basis compared with 2.4% in May.Economists say the impact of President Trump\u2019s tariffs was visible in the CPI data, with prices rising for furniture, toys, and appliances.Prices for new and used cars fell, helping to offset gains in other areas.A July Fed interest rate cut is unlikely, and analysts see roughly 50% odds of a cut in September. <\/p>\n
Inflation accelerated slightly in June, as President Donald Trump\u2019s tariffs on trading partners around the globe began to put upward pressure on consumer prices. The effect was most pronounced within durable goods, including furniture, toys, apparel, and appliances.<\/p>\n
Overall, the June Consumer Price Index<\/a> report showed that inflation rose at a 2.7% annual rate in June and 0.3% on a monthly basis, higher than May\u2019s more muted report<\/a>. Excluding volatile food and energy prices, the inflation rate rose 2.9% on an annual basis and 0.2% in June.<\/p>\n \u201cToday\u2019s report highlights that the impacts from tariffs are taking effect and that higher import prices are being passed on to consumers,\u201d says Morningstar Wealth chief multi-asset strategist Dominic Pappalardo.<\/p>\n But even as consumer prices tick up slightly, Morningstar senior US economist Preston Caldwell notes that for now, \u201cUS firms are shouldering most of the tariff burden.\u201d He says that dynamic will likely change in the second half of the year, as companies look to bolster their profits.<\/p>\n<\/p>\n Early Impacts of Tariffs on Goods Prices<\/p>\n Prices rose across a broad spectrum of goods in June. Excluding cars, Caldwell says prices in the durables category rose 0.8% for the month and are up 5.8% on an annualized basis over the past three months. That\u2019s the fastest rate since 2022.<\/p>\n That category includes appliances, which saw 1.9% price growth in June, household furnishings and supplies, which rose 1%, apparel, which rose 0.4%, and toys, which rose 1.8%.<\/p>\n Jason Pride, chief of investment strategy and research at Glenmede, says the toy category is an \u201cimportant bellwether to monitor\u201d because of its quick turnaround time from shipping docks to store shelves. \u201cPrices for toys have consistently accelerated over the last three months, up 0.3%, 1.3%, and 1.8% sequentially, indicating tariffs are starting to have an impact,\u201d he says.<\/p>\n Meanwhile, food prices rose 0.3% for the month.<\/p>\n June CPI Report Key StatsCPI rose 0.3% for the month after rising 0.1% in May.Core CPI rose 0.2% after rising 0.1% in May.CPI increased 2.7% year over year after increasing 2.4% the prior month.Core CPI rose 2.9% from year-ago levels after rising 2.8% in May.<\/p>\n Autos an Exception<\/p>\n New and used cars were a major exception to the upward trend in June. Prices for new vehicles fell 0.3% for the month, while prices for used cars and trucks fell 0.7%. \u201cDespite substantial tariffs affecting the auto industry, there\u2019s been no upward pressure on vehicle prices,\u201d Caldwell says.<\/p>\n