Inflation heats up in June

Inflation Trends & CPI Analysis - The Consumer Price Index (CPI) increased by 03% month-over-month, aligning with estimates, while core CPI (excluding food and energy) rose by 02%, slightly below expectations [1] - Year-over-year, consumer inflation increased by 27%, and core inflation rose by 29% [1][2] - Inflation is heating up slightly compared to the previous month, where both headline and core inflation increased by only 01% [2] - Core CPI has been consistently lower than estimated for the fifth consecutive month [3] Tariff Impact & Business Strategies - Initial data suggests that tariff increases are contributing less than a third to the monthly CPI increase, with some pressure emerging in categories first exposed to tariffs [7] - Businesses are employing various strategies, including inventory management, alternative sourcing, cost spreading, and margin adjustments, to buffer the impact of tariffs and avoid passing costs directly to consumers [9] - Apparel prices rose by 04%, footwear increased by 07%, and furniture/furnishings prices also saw a rise [8][31] - The effective tariff rate in June was only 10%, while the average tariff rate was around 15%, indicating that the full impact of tariffs has yet to materialize [14] Federal Reserve & Monetary Policy - The Federal Reserve faces a challenging decision regarding interest rate cuts, amidst pressure from the White House and the need to maintain its 2% inflation target [4][17] - The current federal funds rate is considered moderately restrictive, putting downward pressure on demand [18] - There is a risk that prolonged elevated inflation could become ingrained in people's expectations, potentially settling around 3% [20] - The Fed is closely monitoring core services inflation, which has been stubbornly slow to decline, to ensure momentum towards the 2% target [21][25] - The FOMC is divided on future rate cuts, with varying opinions on the number of cuts in 2025 [29] Specific Price Changes - Beef prices saw a significant increase of 2%, while egg prices decreased by 74% [32][33] - New vehicle prices dropped by 03%, and used cars/trucks decreased by 07% [34] - Shelter costs moderated, increasing by 02% compared to May's 03% rise [35] - The energy index rose by 09% in June, with the gas index increasing by 1% [36]