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Inflation in the United States surged to 2.7% in June, marking a significant increase as President Donald Trump's tariff policies began to affect consumer prices. According to the Labor Department, this rise in the consumer price index (CPI) is the highest annual inflation rate since February, driven by higher costs for housing, food, and gasoline.
Economists had anticipated this rise, with projections expecting an increase to between 2.6% and 2.7%. The tariffs, which include a 10% tax on most imported goods, have started to push prices up in several consumer categories. Apparel prices rose by 0.4%, furniture by 1%, and toys by 1.8% in June.
Daniel Hornung, a senior fellow at MIT, noted in comments published by USA Today, "This marks the first inflation report where tariffs are beginning to show up materially in key categories." The Federal Reserve aims for a 2% inflation rate, but tariffs are complicating this goal. The core inflation rate, which excludes food and energy prices, rose to 2.9% in June.
Despite the inflation increase, President Trump celebrated the data, highlighting "Very Low Inflation" and urging the Federal Reserve to cut interest rates by 3 percentage points. However, the Federal Reserve has held interest rates steady, assessing the impact of tariffs on the economy. The Fed is expected to keep rates unchanged at its upcoming meeting at the end of July, with a potential rate cut being considered for September.
The ongoing tariff situation, with new tariffs on imports from Canada, Mexico, and the European Union set to take effect on August 1, could further influence inflation and economic activity in the coming months.