US inflation unchanged last month, though core prices accelerated
By CHRISTOPHER RUGABER, Associated Press Economics Writer
WASHINGTON (AP) — In July, U.S. inflation remained stable, while underlying inflation reached its highest point in five months, fueled by rising prices of imported goods due to tariffs, though offset by lower gas and grocery prices.
According to the Labor Department, consumer prices increased by 2.7% in July compared to a year ago, the same as the previous month and up from a low of 2.3% in April. Excluding food and energy, core prices rose by 3.1%, exceeding the Federal Reserve’s 2% target.
The data indicates that the impact of President Trump’s tariffs is being balanced out by slowing rent increases and lower gas prices. Many businesses are also absorbing some of the costs of the tariffs. The figures likely reflect the effects of the tariffs imposed in April and increased duties on countries like China and Canada.
However, persistent high inflation poses a challenge for the Federal Reserve, especially after a slowdown in hiring following the announcement of tariffs in April. This has led to speculation in financial markets about a potential interest rate cut by the central bank.
Chair Jerome Powell has cautioned that worsening inflation could keep the Fed from taking action, a stance that has drawn criticism from Trump, who has called for lower borrowing costs.
Gas prices fell by 2.2% from June to July and are down by 9.5% from a year earlier. Grocery prices also decreased slightly last month, while restaurant meal prices continued to rise. Tariffs have impacted the prices of imported items, with shoes, furniture, and clothing seeing price increases.
In a controversial move, Trump recently fired the head of the Bureau of Labor Statistics, Erika McEntarfer, and appointed economist E.J. Antoni to ensure the accuracy of economic data. The BLS is facing challenges due to a government-wide hiring freeze, leading to a reduction in data collection for inflation reports.
As Trump finalizes tariffs, Americans are expected to bear more of the trade-war costs. Many companies are already raising prices in response to the tariffs, with consumers likely to feel the impact in the coming months.
Overall, the impact of tariffs on prices remains a topic of debate, with foreign manufacturers, consumers, and U.S. companies sharing the burden differently. Despite initial resistance, companies are beginning to adjust prices to offset tariff costs.
With the uncertainty surrounding trade policies, companies are navigating pricing decisions carefully to mitigate the impact on consumers. The effects of tariffs on retail prices are gradually becoming more apparent as businesses adjust to the new economic landscape.
Associated Press Retail Writer Anne D’Innocenzio in New York contributed to this report.
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