Tariffs Expected To Lift Underlying US Consumer Prices In May
U.S. consumer prices likely increased moderately in May amid relatively cheaper gasoline, but the Trump administration’s import tariffs probably started filtering through to other goods, potentially raising underlying inflation pressures.
The Consumer Price Index report from the Labor Department on Wednesday could show the CPI less the volatile food and energy components rising by the most in four months. Economists said the increase in the so-called core CPI would be attributable to higher prices from President Donald Trump’s sweeping import duties. May would mark the start of tariff-related high inflation readings that could last through year end, they said.
Walmart (NYSE:WMT) last month said it would begin raising prices in late May and June. Economists said inflation has been slow to respond to tariffs as most retailers were selling merchandise accumulated before the duties took effect.
"Retailers showed remarkable restraint in April," said Stephen Stanley, chief U.S. economist at Santander (BME:SAN) U.S. Capital Markets. "May should bring the leading edge of price increases, with the maximum impact coming in June and July."
The CPI likely increased 0.2% last month after advancing by the same margin in April, a Reuters survey of economists showed. Gasoline prices were mostly lower in May as concerns over global economic growth curbed crude oil prices.
In the 12-months through May, the CPI was forecast increasing 2.5% after rising 2.3% in April. Some of the rise in the year-on-year CPI would reflect last year’s low readings dropping out of the calculation.Core CPI is forecast to have climbed 0.3%, which would be the biggest gain since January, after rising 0.2% in April. In the 12 months through May, core CPI inflation is estimated to have increased 2.9% after rising 2.8% in April.
The Federal Reserve tracks different inflation measures for its 2% target. The U.S. central bank is expected to leave its benchmark overnight interest rate in the 4.25%-4.50% range next Wednesday while policymakers monitor the economic impact of the tariffs.
Source: Investing.com
