Tuesday's Consumer Price Index report delivered mixed but ultimately encouraging news for American families, with core inflation undershooting expectations for the fifth straight month even as headline numbers matched forecasts.
The Bureau of Labor Statistics reported that core CPI—which strips out volatile food and energy prices—rose just 0.2 percent in June, below the 0.3 percent economists expected. That pushed the annual core inflation rate to 2.9 percent, matching expectations but marking progress toward the Federal Reserve's 2 percent target.
Core inflation was held down by declines in both new and used vehicle prices, along with airfares and lodging costs. That's real money back in working families' pockets—exactly the kind of relief Americans have been waiting for.
.@PressSec: "Every month since @POTUS took office, core inflation—the best measure of inflation—has beat or matched expectations. The data proves that @POTUS is stabilizing inflation and the Panicans continue to be wrong about tariffs raising prices." https://t.co/bFLFl7eoOs
— Rapid Response 47 (@RapidResponse47) July 15, 2025
The headline CPI did tick up as expected, with consumer prices rising 0.3 percent monthly and 2.7 percent annually, but the core numbers tell the more important story for Fed officials weighing their next move.
Did Tariffs Have an Impact?
Some of the early headlines regarding the inflation report point to recent tariffs as the reason for what the Associated Press called the "highest level since February."
But it's sort of a mixed bag as President Donald Trump's tariff impact remains limited but visible. Effects of tariff increases were visible in household furnishings up one percent and toy prices climbing 1.8 percent on the month, but these increases were offset by broader deflationary pressures in key categories.
However, the market seems to be taking recent news of tariffs in stride, believing now that tariff announcements are preludes to negotiation and that they aren't permanent. Wall Street appeared largely unaffected coming out of the weekend in the wake of announced tariffs on European Union nations and Mexico.
CNBC's Rick Santelli points out that, given what we're seeing in the American economy right now, today's report contains "respectable" numbers.
CNBC's Rick Santelli: “The death of the labor market has been greatly exaggerated based on recent data and I think that all in all, the inflation numbers — they’re pretty respectable here.” pic.twitter.com/NfRFyQc3yH
— Rapid Response 47 (@RapidResponse47) July 15, 2025
All Eyes on the Fed
The softness in core inflation extends Fed officials' runway for potential rate cuts. Markets are now pricing in stronger odds for a September Federal Reserve interest rate cut, which would provide relief for homebuyers and businesses carrying variable-rate debt.
While we're still not at the Fed's two percent inflation target, today's report shows the underlying trend moving in the right direction. The core miss gives policymakers the evidence they need that inflation pressures are genuinely easing, not just temporarily masked by energy price swings.
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