US inflation remained muted in May, with only a limited impact from President Trump’s tariffs. The Consumer Price Index rose 2.4% year-over-year, above April’s 2.3% increase, but below economists’ expectations. “Core” inflation, which excludes food and energy prices, stayed at 2.8%, closely monitored by policymakers as a gauge for underlying price pressures.
While businesses have warned of potential price hikes due to tariffs, the data shows that consumers are still experiencing limited effects. Furniture prices fell 0.8% in May, while clothing costs dropped 0.4%. The latest Beige Book reported widespread reports of contacts expecting costs and prices to rise at a faster rate, but these expectations were not reflected in consumer prices.
Samuel Tombs, chief economist, attributed the delay to businesses stockpiling inventories ahead of tariffs and locking in lower prices. Americans have been reluctant to spend due to financial strain and limited job prospects. David Kelly, chief global strategist, noted that retailers are hesitant to raise prices until they have to, creating a “nervous dance” between consumers and retailers.
However, Kelly warned that if current tariffs stay in place, price pressures will build up late this summer and peak in the fourth quarter, pushing inflation to around 4%. Tariffs remain the biggest wild card for the Fed’s outlook on inflation, growth, and the labor market. The central bank is now grappling with how Trump’s policies will impact prices and for how long any resulting period of higher inflation will last.
In response to the latest inflation data, President Trump reiterated his call for the Fed to lower interest rates by a full percentage point, citing reduced debt costs. However, officials at the Fed are cautious about the risk of sustained price increases, which could undermine their ability to support the economy through rate cuts if growth slows and the labor market weakens.
For now, the Fed is expected to maintain its current stance on interest rates when it gathers next week, pending clearer signs that the labor market is deteriorating.
Source: https://www.nytimes.com/2025/06/11/business/cpi-may-inflation-tariffs.html