Grocery will be available for viewing at Walmart Supermarket in Houston, Texas on May 15th, 2025.
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The June inflation report considers that it is not particularly important for what the numbers in the headings show in the underlying data, particularly if tariffs are beginning to affect.
The consumer price index, scheduled for 8:30am ET on Tuesday, is expected to show a rise on both headline and core measurements, with the latter still far exceeding the Federal Reserve targets.
But what really matters is the possibility that President Donald Trump’s tariffs could hit prices and potentially increase inflation.
“June is the first reading that these tariffs actually start to bite in a very prominent way,” said Chris Hodge, American economist at Natixis CIB Americas.
Measures a wide range of goods and services baskets across the US economy, CPI is expected to show a monthly increase of 0.3% in both headline and core rates, with the latter excluding volatile food and energy costs. Each year, the index is expected to show 2.7% heading readings and 3% at core.
In the case of the Fed, central bank policymakers use another Department of Commerce gauge as their primary forecasting tool, but both figures are north of the 2% target.
But even more importantly, the CPI gives us a glimpse into how Trump’s obligations have progressed into the consumer pocket. As Hodge views the report, he looks at two important areas.
“I’m looking at cars, I’m looking at apparel. Both readings last month were very low. “These are two sectors that are very sensitive to increased tariffs.”
In fact, May’s readings were generally restrained, with little upward pressure from the limited tariffs that came into effect in April. Both headlines and Core CPI rose 0.1% each month. New (-0.3%) and used (-0.5%) vehicle prices fell by 0.4%, while energy prices fell by 1%.
Goldman Sachs economists believe that second-hand cars are declining based on recent trends in car auctions, but these numbers are generally expected to turn a turnaround. Goldman predicts a consensus gain of 0.2% at its core CPI in June. Federal Reserve officials believe Core will provide a better guide to long-term inflation trends.
Broadly speaking, economists are looking for trends in core products as the best barometer for the impact of tariffs. This category includes items such as apparel and footwear, electronics, residential goods, furniture and more.
Goldman expects a general contribution from increased auto insurance and airfares, and a tariff of approximately 0.08% points on core reading. The company said sectors that have hit tariffs like furniture, recreation, education, communications and personal care can see price hits.
Economists also monitor shelters prices. Shelter prices are stubborn components and keep your readings high.
“Our forecasts reflect a rapid acceleration in most core product categories, but at least in the short term, the impact of core services on inflation is limited,” Goldman said in a memo.
The White House is also closely monitoring the report. Trump and other executives are pushing the Fed to lower interest rates, and a higher than expected reading of inflation could lead central bankers to dig into their heels on policy easing.
“The Fed will want to ensure that expectations of longer runs do not go unchang, and I think the Fed will need to see the peak of tariff-induced inflation before they can comfortably cut off.” “We are now when split into individual components (inflation reports) are more useful than ever and more necessary.”
