US core inflation has been lower than expected for the fifth consecutive month, and the transmission of tariffs is beginning to show signs.

In June, the core inflation rate in the United States remained below expectations for the fifth consecutive month, as the decline in car prices offset the increase in prices of other goods affected by tariffs. Excluding food and energy prices, the core CPI rose by 0.2% month-on-month and 2.9% year-on-year in June, both 0.1 percentage points lower than expected. The data shows that the overall CPI in the US increased by 0.3% month-on-month and 2.7% year-on-year in June, in line with market expectations and higher than the 0.1% and 2.4% increases in May. Prices of categories heavily affected by tariffs such as toys, furniture, appliances, and clothing notably rose, indicating that companies are passing on import costs to consumers, while prices of new and used cars decreased. Omar Sherif, President of Inflation Insights, pointed out that excluding cars, the core commodity prices jumped by 0.55% month-on-month in June, the largest increase since November 2021. He stated in the report: "The data shows that the tariff effect is starting to show." The persistently lower-than-expected inflation data raises questions about the broader impact of President Trump's tariff policy on consumer prices. Some companies have been able to protect consumers from price increases by stockpiling inventory ahead of time or sacrificing profits to absorb costs temporarily. This lower-than-expected inflation report may strengthen calls for the Federal Reserve to cut interest rates. While some officials have hinted at a rate cut at the upcoming meeting in two weeks, policymakers are divided on whether the impact of tariffs is a short-term shock or a sustained pressure, and are likely to keep interest rates unchanged. Shima Shah, Global Chief Strategist at Principal Asset Management, advised in the report: "Although the impact of tariffs on inflation might be temporary, with new tariffs continuing to be implemented, the Fed should at least wait for a few more months." Following the release of the data, stock index futures maintained their upward trend, US bond yields fluctuated, and the US dollar weakened. Service prices (excluding energy) rose by 0.3%. The main factors driving inflation in recent years slowing housing cost growth, primarily due to a drop in hotel prices. Another key service price indicator that the Fed closely monitors, excluding housing and energy costs, rose to 0.2%, with hospital service prices seeing a significant increase. While Fed officials emphasize the importance of this indicator in determining the inflation trajectory, it is based on the Personal Consumption Expenditures Price Index (PCE) - which assigns a lower weight to housing than the CPI, explaining why the PCE is closer to the Fed's 2% target. The Producer Price Index data to be released on Wednesday will provide clues for the upcoming PCE report at the end of the month. The main reason companies are cautious about raising prices is concern about consumer affordability this year, the public's pessimism about the economy has increased, with the real average hourly wage growth rate slowing to 1%, reaching a new low since early 2025. However, companies like Nike and Dell have recently announced price increases. Due to the most stringent tariff implementation by Trump being postponed from early July to early August, most companies have been able to delay price increases. However, Trump has recently strengthened tariff threats against copper and countries like Canada and Mexico, and has stated that there will be no further extensions. Parties involved are seeking to reach an agreement before the deadline.