The annual U.S. inflation rate rose 2.7% in June, a faster clip than the 2.4% rise seen for the 12-month period ending in May, the U.S. Bureau of Labor Statistics reported Tuesday.
On a monthly basis, inflation rose 0.3% in June following a 0.1% increase in May. Core inflation, which excludes more volatile food and energy prices and is considered a more reliable gauge of price pressures, was up 0.2% for the month of June.
The government said the increase in shelter costs (+0.2%) was the main driver of the all-items monthly inflation increase. The energy index rose 0.9% in June as the price of gasoline increased 1.0% for the month. The food index rose 0.3% in June.
The monthly data also showed signs that companies may be starting to pass along the costs of U.S. tariffs to consumers. Prices of some product categories exposed to tariffs were notably higher in June, such as coffee (+2.2%), major appliances (+1.9%), toys (+1.8%), and household equipment and furnishings (+1.7%).
Indexes that declined during the month of June include used cars and trucks (-0.7%), new vehicles (-0.3%), and airline fares (-0.1%).
On an annual basis, core inflation (excluding food and energy) has risen 2.9% compared to June 2024.
The latest inflation report could make it more difficult for the Federal Reserve to implement interest rate cuts at its next meeting in two weeks. The CME Group’s FedWatch tool on Tuesday put the probability of an interest rate cut at only 3%.
Stock market reaction on Tuesday was mixed, with Dow industrials falling and Nasdaq higher.