U.S. core inflation has fallen short of expectations for five consecutive months, with signs of tariff transmission beginning to emerge

According to the Zhitong Finance APP, the core inflation rate in the United States in June fell below expectations for the fifth consecutive month, as declining car prices offset price increases of other goods affected by tariffs. Excluding food and energy prices, the core CPI in June rose 0.2% month-on-month and 2.9% year-on-year, both 0.1 percentage points lower than expected.

Data shows that the CPI in the United States rose 0.3% month-on-month and 2.7% year-on-year in June, both in line with market expectations, and up from increases of 0.1% and 2.4% in May, respectively.

Prices of categories heavily impacted by tariffs, such as toys, furniture, home appliances, and clothing, have risen significantly, indicating that companies are passing on import costs to consumers, while prices for new and used cars have declined.

Omar Sharif, president of the inflation research firm Inflation Insights, pointed out that excluding cars, core goods prices jumped 0.55% month-on-month in June, marking the largest increase since November 2021. He stated in the report: "The data proves that the effects of tariffs are beginning to show."

However, the persistently lower-than-expected inflation data raises questions about the extent to which President Trump's tariff policy will impact consumer prices. Some companies have temporarily shielded consumers from price increases by stockpiling inventory in advance or sacrificing profits to absorb costs.

This disappointing inflation report may strengthen Trump's calls for the Federal Reserve to cut interest rates. Although some officials have hinted at a willingness to lower rates at the upcoming meeting in two weeks, policymakers remain divided on whether the impact of tariffs is a short-term shock or a sustained pressure, and it is likely that interest rates will remain unchanged.

Seema Shah, global chief strategist at Principal Asset Management, suggested in a report: "Although the inflationary push from tariffs may be temporary, with new tariffs continuously being introduced, the Federal Reserve should at least wait a few more months."

After the data was released, stock index futures maintained their upward trend, U.S. Treasury yields fluctuated, and the dollar weakened.

Service prices (excluding energy) rose 0.3%. The main factor driving inflation in recent years—the slowdown in housing cost growth—was primarily dragged down by falling hotel prices. Another service price index that the Federal Reserve focuses on, excluding housing and energy, rebounded to 0.2%, with hospital service prices rising significantly.

Although Federal Reserve officials emphasize the importance of this index for assessing the inflation trajectory, its calculation is based on the Personal Consumption Expenditures Price Index (PCE)—which has a lower weight for housing than the CPI, explaining why the PCE is closer to the Federal Reserve's 2% target The PPI data to be released on Wednesday will provide forward-looking clues for the PCE report to be published at the end of the month.

The main reason companies are cautious about raising prices is the concern over consumer affordability—this year, the public has become increasingly pessimistic about the economy, and the year-on-year growth rate of real average hourly wages has slowed to 1%, the lowest since early 2025. However, companies like Nike and Dole have recently announced price increase plans.

Due to the postponement of the implementation deadline for Trump's strictest tariffs from early July to early August, most companies have been able to delay price increases. However, Trump has recently intensified threats of tariffs on copper and countries like Canada and Mexico, claiming that he will not extend the deadline again. Relevant parties are seeking to reach an agreement before the deadline