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U.S. Inflation Accelerated in June as Trump’s Tariffs Pushed Up Prices
The Consumer Price Index rose 2.7 percent from a year ago, as the global trade war started to bite.
Inflation accelerated in June as President Trump’s tariffs started to leave a bigger imprint on the economy, keeping the Federal Reserve on track to hold interest rates steady when policymakers next meet this month.
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The June data still reflects only the initial impact of Mr. Trump’s global trade war. Economists expect price pressures to intensify over the coming months, especially if new tariffs the president has threatened against the European Union and a host of other countries in recent days are imposed on Aug. 1 as planned.
Up to this point, inflation has been more muted than feared when Mr. Trump returned to the White House. That has emboldened the president and his top advisers to dismiss the latest set of warnings from economists about the damage steep tariffs could have on consumers and businesses across the country.
What economists and policymakers fear most is a stagflationary shock in which inflation rises as the economy flatlines or, worse, contracts. Before the latest trade escalation, the Federal Reserve saw the risks of that outcome receding. Now, the risks are rising once again.
Signs of accelerating price pressures will make it much more difficult for the central bank to restart interest rate cuts that have been on hold since January. Officials have instead been wedded to a “wait-and-see” approach, opting to keep borrowing costs steady until they have a clearer sense of how Mr. Trump’s policies — which beyond tariffs include a crackdown on immigration, sweeping tax and spending cuts, and a broad deregulatory push — will impact the economy.