Inflation in the United States rose in June as tariffs on imports began to push up prices of some goods, in line with economists’ expectations that price pressures will increase in the second half of the year.
The personal consumption expenditures (PCE) price index rose 0.3% last month after a revised 0.2% increase in May, the Commerce Department’s Bureau of Economic Analysis said on Thursday. Economists polled by Reuters had expected a 0.3% increase after an initial 0.1% increase in May. In the 12 months through June, the PCE index rose 2.6% from 2.4% in May.
The data was included in the preliminary report on second-quarter gross domestic product (GDP) released on Wednesday, which showed inflation starting to ease but still above the Federal Reserve’s 2% target. Economists said businesses were still selling off inventories that were built up before President Donald Trump’s massive import tariffs took effect.
They expect prices to rise in the second half of the year as the additional costs of tariffs start to be passed on to consumers. Procter & Gamble Co. announced this week that it would raise prices for some products in the U.S. to offset the cost of tariffs.
The U.S. central bank uses the PCE price measure as a reference for monetary policy. The Fed on Thursday morning kept its benchmark interest rate at 4.25%-4.50% since December, resisting pressure from Trump to reduce borrowing costs. Economists expect the Fed to resume easing in September.
Fed Chairman Jerome Powell, responding to questions about tariff-related price increases, said “the reasonable baseline scenario is that this is a one-time effect,” but added that “this process will likely be slower than expected and will take time to fully understand.”
Excluding volatile food and energy components, the core PCE index rose 0.3% last month after rising 0.2% in May. In the 12 months through June, core inflation rose 2.8%, the same as May.
The BEA also reported that consumer spending, which accounts for more than two-thirds of economic activity, rose 0.3% in June after being unchanged in May. The data was also included in the preliminary GDP report, which showed consumer spending expanding at an annualized rate of 1.4% after nearly stalling in the first quarter.
In the second quarter, economic growth accelerated to a 3.0% pace, driven by a sharp narrowing of the trade deficit as imports fell, compared with a record surge in the first quarter. The economy contracted 0.5% in the first three months of the year.
