US June consumer prices rise 2.7%… “Tariff effects come into full swing”

Largest increase in 4 months

Slightly exceeded expert estimates

Trump: “Interest rate should be lower than 1% per year”

Again presses Powell for dismissal

US consumer prices surged sharply in June. This is interpreted as a sign that the limited tariff policies of the Donald Trump administration are now having a full-fledged impact.

US June consumer prices up 2.7%...“Tariff effects come into full swing” On the 15th, the U.S. Department of Labor announced that the Consumer Price Index (CPI) in June rose by 2.7% year-on-year. This is the biggest increase in four months since February (2.8%). The increase was not only larger than that in May (2.4%), but also slightly exceeded expert estimates (2.6%). Compared to the previous month, it rose 0.3%. This is the largest monthly increase since January (0.5%).

Excluding the more volatile energy and food sectors, core CPI rose 2.9% year-on-year and 0.2% from the previous month. The increase was slightly larger than in May, but fell short of expert estimates. Core CPI is closely watched by the Fed as an indicator of underlying inflationary trends.

Despite concerns over inflation driven by Trump’s tariffs, until May most retailers sold inventory that was built up before tariffs were imposed, so the effect was not factored into prices. This became the backdrop for President Trump’s calls to lower interest rates. However, Fed Chair Jerome Powell and others have consistently warned about possible price increases over the summer.

According to Reuters, Goldman Sachs expects core CPI to increase by 0.3–0.4% each month over the next several months. This reflects expected price hikes in electronics, cars, apparel, and other goods due to tariff increases. However, it was forecast that service prices would not be significantly affected in the short term.

With ongoing uncertainties over tariff policy and concerns about the fiscal deficit, the prevailing outlook is that the Fed will keep its benchmark interest rate unchanged at the Federal Open Market Committee (FOMC) meeting on the 30th.

On this day, according to FedWatch from the Chicago Mercantile Exchange (CME), the probability that the benchmark rate will be held at 4.25–4.5% at this FOMC meeting is seen at 97.4% according to the interest rate futures market.

On the topic of rate cuts, President Trump again criticized Fed Chair Powell. President Trump called Powell an “idiot” and insisted that the benchmark interest rate should be below 1% per year, while Powell responded directly by voluntarily requesting an audit on alleged “excessive spending for Fed building renovations” raised by the Trump side.

US media Axios reported, “On the surface, it may look like a rooftop garden issue, but in reality it’s a battle for control over the Fed,” adding that “Trump is seeking grounds for the legitimate dismissal of Powell before his term expires.”

Sangmi Ahn/Hankyeongje reporter saramin@hankyung.com