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- USA TODAY and Yahoo may earn commission from links in this article. Pricing and availability subject to change.Inflation accelerated in June. Is the 'tariff shock' finally here?</p>
<p>Daniel de Visé, USA TODAY July 15, 2025 at 4:37 PM</p>
<p>In recent months, critics of President Donald Trump's tariff campaign have braced for an unwelcome rise in the inflation rate. That moment may have arrived.</p>
<p>Prices rose 2.7% in the 12 months through June, the Labor Department announced on July 15. It's the highest annual inflation rate since February, and a sign that Trump's import taxes may be finally raising consumer prices, as many forecasters predicted. Rising prices for housing, food and gasoline drove the increase.</p>
<p>Economists widely expect tariffs to reignite inflation, which vexed American consumers in the pandemic years.</p>
<p>The annual inflation rate eased to a four-year low of 2.3% in April, then rose to 2.4% in May, a figure below projections, as Trump's tariffs began to take hold.</p>
<p>Forecasters expected annual inflation to rise to 2.6% or 2.7% in June, mostly because of mounting tariffs, according to projections from the data research firm FactSet and The Wall Street Journal.</p>
<p>Trump has enacted a flurry of tariffs since taking office, although many have since been paused or postponed. There is now a 10% tariff on most imported goods.</p>
<p>Already, prices are increasing on some categories of consumer goods potentially impacted by tariffs. Apparel prices rose by 0.4% in June. Furniture prices rose by 1%. Prices on video and audio products increased by 1.1%. Toy prices rose by 1.8%.</p>
<p>Sooner or later, most economists expect the import taxes to lift the inflation rate, as retailers pass their costs on to American consumers. The June inflation report may be an early sign of that effect.</p>
<p>"This marks the first inflation report where tariffs are beginning to show up materially in key categories — from appliances and furnishings to apparel and groceries," said Daniel Hornung, senior fellow at MIT and former deputy director of the National Economic Council, in a written comment. "But it is unlikely to be the last: Tariffs will likely increase prices more dramatically in the months ahead, as businesses work through their inventories from pre-tariff imports."</p>
<p>The Federal Reserve aims for an annual inflation rate of 2%, a figure sufficiently low that consumers don't really notice it. The central bankers don't expect to reach that goal any time soon, and tariffs are the main reason.</p>
<p>"Were it not for the tariff shock, US inflation would likely have hit the Fed's 2% target this year," said Seema Shah, chief global strategist at Principal Asset Management, in a written comment.</p>
<p>Why haven't tariffs pushed prices even higher?</p>
<p>The inflation rate for June is above 2%, but it is not particularly high.</p>
<p>So far in 2025, Trump's tariff campaign hasn't registered much in consumer price data. Economists polled by The Wall Street Journal now predict the annual inflation rate will rise to a modest 3% in December.</p>
<p>The reason: While Trump has threatened massive tariffs against most of the nation's leading trade partners, his administration has balked at enacting them. Many of the most punitive tariffs are now paused.</p>
<p>That could change. July 10, Trump announced plans to raise the tariff rate on many Canadian imports from 25% to 35% and to impose a blanket tariff of 15% to 20% on most other countries. Two days later, Trump announced 30% tariffs on all imports from Mexico and the European Union. The new taxes are set to take effect August 1.</p>
<p>When will the Fed cut interest rates?</p>
<p>Those tariffs, and rising inflation, could prompt the Federal Reserve to lower interest rates.</p>
<p>The "core" inflation rate, which excludes food and energy prices, was 2.9% in the 12 months through June. That index is closely watched by economists and the Fed as a less volatile measure of price increases.</p>
<p>The Fed has held the benchmark federal funds rate steady all year, in a range from 4.25% to 4.5%. The central bank has forecast two coming rate cuts later this year, moves tailored to lower borrowing costs and stimulate the economy.</p>
<p>Few forecasters expect the Fed to cut rates at its next meeting, at the end of July, according to the FedWatch tracker. Many expect a cut at the next meeting, in September.</p>
<p>"The Fed will hold rates steady at their decision at the end of this month," said Bill Adams, chief economist at Comerica Bank, in a comment. "A rate cut is possible later this year but not assured."</p>
<p>President Trump has pressured Fed Chairman Jerome Powell to either lower interest rates or resign. Politicians generally favor lower interest rates, because they boost the economy.</p>
<p>But lower interest rates can also seed inflation. Powell, who operates independently of the president, has said he wants to gauge how tariffs affect prices before the Fed moves to cut rates.</p>
<p>Contributing: Paul Davidson</p>
<p>(This story was to add new information)</p>
<p>This article originally appeared on USA TODAY: Inflation accelerated in June. Are tariffs to blame?</p>
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