Inflation rose by three-tenths of a percentage point to 2.7% for the year ending in June, the Bureau of Labor Statistics reported Tuesday in an update to the consumer price index.
Forecasters had expected inflation to tick up to 2.6% in the consumer price index.
Core inflation, a measure that strips out volatile food and energy prices, rose a tenth of a percentage point to a 2.9% annual rate.
The increase in the headline rate of inflation suggests renewed price pressure as President Donald Trump carries out a trade war involving heavy tariffs. Economists generally expect that the tariffs will have the effect of raising prices, all else equal.
In the month of June alone, prices rose 0.3%.
Officials at the Federal Reserve are watching the inflation numbers closely to determine whether to lower interest rates further to spur more economic activity or to forgo further rate cuts to try to tamp down inflation.
“Rather than giving the economy a clean bill of health, Fed policymakers are likely to view today’s CPI report as a one-off, and they will continue to be on the edge of their seats in watch-and-wait mode,” said Chris Rupkey, chief economist at FWDBONDS.
Tuesday’s report showed that families are still enduring high prices but that the rate of inflation has slowed for some key items. Overall, food from the grocery store is 2.4% more expensive than last year, but the price of food at restaurants has increased by 3.8% over the past 12 months.
Over the past year, some food items, such as ground beef, have increased in price by more than 10%, but other food items, such as fresh vegetables and milk, have seen year-over-year price declines.
The price of eggs, a political hot topic largely affected by the spread of bird flu, rose more than 27% over the past year but decreased by nearly 11% over the past month alone.
The Fed cut rates by a whole percentage point last year. As inflation proved sticky, though, the central bank opted to hold interest rates steady at its January and March meetings.
The Fed’s goal is 2% annual inflation.
The latest inflation report comes against the backdrop of an ongoing and escalating war by the Trump administration against Fed Chairman Jerome Powell over the Fed’s refusal to start cutting interest rates.
In late May, Trump summoned Powell to the White House, where Trump pushed for lower rates in a meeting attended by several administration officials, including Vice President JD Vance, Treasury Secretary Scott Bessent, and Commerce Secretary Howard Lutnick.
Trump has also berated Powell in the press and on social media. It is a legal gray area whether Trump has the ability to fire Powell, but Powell has said he doesn’t believe the president has that authority.
Office of Management and Budget Director Russ Vought further ratcheted up pressure against Powell last week when he sent a letter peppering Powell with questions over the renovation of the Fed’s headquarters in Washington, D.C. The letter said Trump is “extremely troubled” by his management of the Fed and called the overhaul of the headquarters “ostentatious.”
ECONOMY ADDS 147,000 JOBS IN JUNE, MORE THAN EXPECTED
Trump and Republicans ran on lowering inflation, which got to its highest levels in decades under former President Joe Biden. If inflation is vanquished, it would be a massive political win for Republicans heading into the midterm elections.
If inflation ticks back up and the Fed is forced to hold interest rates higher for longer, it not only makes the situation between the Trump administration and Powell more precarious but is also bad news for Republicans.
