Inflation holds steady amid trade war threats

By Caroline Boda
The Center Square

As President Donald Trump’s tariff policies come into effect, July’s Consumer Price Index showed overall consumer prices rose 2.7% annually, slightly lower than forecasted by economists.

The CPI measures changes in price of everyday consumer goods like groceries and clothes over time. July’s CPI rose 0.2% on a monthly basis since June’s reading which came in at 2.7%.

Since a universal 10% tariff was implemented in April, economists have been watching how levies would affect costs for consumers. Data has shown that tariff impacts have been marginal so far this year, in part due to businesses stockpiling goods before tariffs went into effect.

However, prices began to increase in June’s CPI reading, especially in categories like furniture and household appliances. July’s data shows a similar trend. The full effect of Trump’s tariffs is unknown as July’s CPI reading does not include the fresh batch of tariffs put in place last week.

An inflation measure excluding volatile goods like food and energy accelerated by 3.1% annually. This number rose 0.3% over the course of the month and reflects the highest acceleration in five months.

July’s CPI reading showed gas prices declined 9.5% in July since last year. Meanwhile, ground beef rose 11.5% and eggs rose 16.4% from July 2024.

The Federal Reserve has held interest rates steady this year as officials have waited to see the impacts of widespread tariffs implemented by the White House on trading partners and certain types of goods. Trump has openly clashed with Federal Reserve Chair Jerome Powell over his decision to keep rates as is and threatened to fire him earlier this year.

While July’s CPI reading shows some increases in consumer prices, the numbers are likely not significant enough to dissuade the Fed from cutting rates in September as expected.

Tuesday’s report from the Bureau of Labor Statistics comes one day after Trump named Heritage Foundation economist E.J. Antoni as the agency’s new head. Trump fired previous BLS commissioner Erika McEntarfer earlier this month, citing “rigged” numbers after July’s job report showed weak hiring.