Tariff increases have not yet appeared! The U.S. May CPI year-on-year is 2.4%, and the core CPI month-on-month is 0.1%, remaining below expectations for the fourth consecutive month

On June 11, Wednesday, the U.S. Bureau of Labor Statistics released the CPI data for May:

• The overall CPI rose by only 0.1% month-on-month, below the expected 0.2%, with an increase of 0.2% in April; the CPI rose slightly by 2.4% year-on-year, in line with expectations, compared to 2.3% in April;

• The core CPI, excluding volatile food and energy, rose by 0.1% month-on-month, below the expected 0.2%, slowing from 0.2% in April; year-on-year it was 2.8%, below the expected 2.9%, with April at 2.8%, maintaining the lowest level since March 2021;

After the data was released, the U.S. dollar index fell about 20 points in the short term, currently reported at 98.76. U.S. stock futures rose in the short term, with all three major stock index futures turning positive, and the Nasdaq 100 index futures up 0.4%. The yield on the U.S. 10-year Treasury bond fell in the short term, currently reported at 4.501%. Spot gold rose in the short term, currently reported at $3348.32 per ounce.

Interest rate swaps indicate that traders expect a 75% chance of the Federal Reserve cutting interest rates before September.

Decline in car and clothing prices, increase in toys and home appliances due to tariffs

Year-on-year, the price increase of service costs continues to slow down, while the price increase of goods is also relatively moderate.

Specifically, prices for new and used cars have both decreased, and clothing prices have also fallen, indicating that the cost increases due to tariffs have not yet been passed on to consumers.

At the same time, the decline in energy prices dominated the slowdown in CPI, with gasoline prices dropping by 2.6%, which somewhat limited the overall CPI increase.

Some categories significantly affected by the increase in import tariffs have indeed seen notable price increases. Toy prices recorded the largest increase since 2023, while large appliance prices saw the largest increase in nearly five years.

Additionally, grocery prices rose by 0.3% after a decline in April.

Tariff increases have not yet appeared

A series of inflation data that fell below expectations further proves that consumers have not yet felt the pressure of Trump tariffs, possibly because the most severe tariffs have been temporarily halted, or because companies have absorbed the additional costs so far.

However, once tariffs are raised, it will become more difficult to protect consumers from these costs, which is one of the reasons economists expect companies to raise prices more significantly in the coming months.

The risk is that U.S. consumers are still suffering from years of high inflation after the pandemic, and their burden is limited, which will ultimately reduce spending. Companies like JM Smucker Co., which owns brands like Folgers Coffee and Twinkies, as well as Best Buy, have indicated that this will put pressure on profits, while forecasters expect economic growth to slow down Given the limited transmission of inflation so far, a stable labor market, and ongoing uncertainty surrounding Trump’s policies, the Federal Reserve is widely expected to maintain interest rates at next week's meeting, with investors and economists particularly focused on policymakers' latest economic forecasts.

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