Gasoline prices fell as the summer driving season got underway. But other energy costs are expected to be higher.
Joe Raedle/Getty Images North America
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Joe Raedle/Getty Images North America
Inflation remained stable last month as the impact of President Trump’s tariffs on consumer prices remained minimal.
The latest report from the Labor Department revealed a 2.4% increase in consumer prices from a year ago, slightly higher than the previous month’s figures.
However, the month-to-month price change was only 0.1% in May, down from 0.2% in the previous month, with lower gasoline prices offsetting the rise in rent and grocery costs.
While some goods prices, such as appliances and toys, saw a slight increase in May due to Trump’s tariffs, overall goods prices remained steady. Forecasters anticipate a more noticeable impact of the tariffs in the coming months.
The president’s imposition of at least a 10% import tax on most U.S. imports could see a further increase next month after the 90-day window for trade negotiations concludes.
Federal Reserve governor Adriana Kugler cautioned that the tariffs could reverse the progress made on inflation in the past two years.
“The effects of higher tariffs are already evident, and I anticipate they will continue to push inflation higher through 2025,” Kugler said during a recent speech at the Economic Club of New York.
Despite a full percentage point reduction in benchmark interest rates by the Fed last year, the risk of tariffs reigniting inflation has made the Fed hesitant about further rate cuts, despite continued pressure from the president.
The central bank is expected to maintain interest rates at the upcoming Fed meeting next week.
Egg and gas prices decline
Grocery prices saw a 0.3% increase in May, while egg prices continued to decrease as the national egg-laying hen population recovered from a recent avian flu outbreak.
Although gasoline prices have dropped in recent months, other energy prices are on the rise.
Electricity prices are expected to raise air conditioning bills by 2.1% this summer, despite slightly cooler average temperatures, according to a new Energy Department forecast.
The surge in power prices is attributed to high demand from commercial and industrial customers, including data centers, and increased natural gas exports for electricity generation.
Excluding volatile food and energy prices, “core inflation” remained at 2.8% for the 12 months ending in May, unchanged from the previous 12-month period.
