Jerome Powell has more housing problems now, including the Fed's

Source: AP

U.S. consumer prices picked up in June, likely marking the start of a long-anticipated tariff-induced increase in inflation that has kept the Federal Reserve cautious about resuming its interest rate cuts.

The Consumer Price Index increased 0.3% last month after edging up 0.1% in May, the Labor Department's Bureau of Labor Statistics said on Tuesday. That was the largest gain since January. In the 12 months through June, the CPI advanced 2.7% after rising 2.4% in May.

Economists polled Reuters had forecast the CPI would climb 0.3% and increase 2.6% on a year-over-year basis.

Inflation readings came in on the low side in February through May, leading to demands by President Donald Trump for the U.S. central bank to lower borrowing costs. Economists said inflation has been slow to respond to the sweeping import duties Trump announced in April because businesses were still selling stock accumulated before the tariffs came into effect.

Trump last week announced higher tariffs would come into effect on August 1 for imports from a range of countries, including Mexico, Japan, Canada and Brazil, and the European Union effective August 1, raising the effective tariffs rate. Economists expect higher goods prices to prevail through the summer.

Excluding the volatile food and energy components, the CPI rose 0.2% in June after edging up 0.1% in the prior month. In the 12 months through June, core CPI inflation increased 2.9% after rising 2.8% for three straight months.

Strong price increases for goods, however, could be somewhat offset by moderate rises in services costs, and ease concerns of a broad-based rise in inflationary pressures. Soft demand has limited price increases for services-related categories like air fares as well as hotel and motel rooms.

The Fed tracks different inflation measures for its 2% target. The central bank is expected to leave its benchmark overnight interest rate in the 4.25%-4.50% range at a policy meeting later this month. Minutes of the central bank's June 17-18 meeting, which were published last week, showed only "a couple" of officials said they felt rates could fall as soon as the July 29-30 meeting.

Goldman Sachs is forecasting monthly core CPI inflation increases of between 0.3%-0.4% over the next few months, reflecting tariff-related increases in the prices of consumer electronics, autos and apparel. The investment bank expects limited near-term impact on core services inflation.

Source: Reuters

Canadian consumer prices accelerated for the first time in four months and underlying price pressures firmed, likely keeping the central bank from cutting interest rates later this month.

The consumer price index rose at a 1.9% yearly pace in June, accelerating from 1.7% in May, Statistics Canada data showed Tuesday. On a monthly basis, the index edged up 0.1%. Both figures matched the median projections in a Bloomberg survey of economists.

Headline inflation rose at a faster pace because gasoline prices fell to a lesser extent in June, while passenger cars and furniture saw tariff-driven price increases on the month. Excluding energy, the index was up 2.7% from last year.

The Bank of Canada’s two preferred core inflation measures accelerated slightly, averaging 3.05%, up from 3% in May, and above economists’ median projection. The three-month moving annualized average of the core rates surged to 3.39%, from 3.01% previously.

There’s also another important sign of firmer price pressures: The share of components in the consumer price index basket that are rising by 3% or more — another key metric the central bank’s policymakers are watching closely — expanded to 39.1%, from 37.3% in May.

Governor Tiff Macklem and Bank of Canada officials kept policy rate at 2.75% for the past two meetings, citing concerns over firmer core inflation and uncertainty around US trade policy. They’re trying to assess how tariff-driven prices and a slowing economy would interact and shape inflation path ahead.

In June, the economy added over 83,000 jobs and the unemployment rate eased to 6.9%, suggesting the broader job market is holding up well in the face of mounting trade uncertainty.

US President Donald Trump’s new round of tariff threats against trading partners, including a new 35% rate for Canada, injected new uncertainty to the outlook. Combined with firm core inflation pressures and surprisingly robust jobs data, the Bank of Canada is likely to the sidelines again on July 30.

In June, trade and tariff uncertainties appeared to already drive up prices as businesses facing higher costs passed down those increases to consumers. Prices for durable goods grew 2.7%, up from 2%.

Passenger vehicle prices rose 4.1% from a year ago in June, compared with May’s 3.2% increase. Tighter inventories also led to a 1.7% spike in prices for used cars, which was the first year-over-year increase in 18 months.

Furniture prices soared 3.3%, a much faster pace than 0.1% in May, while prices for clothing and footwear rose 2%, up from 0.5%.

Canadians continue to pay less at the pump, however, with prices dropping 13.4% in June. They’re also seeing slower price gains for food purchased from stores, which rose 2.8% from a year ago, following a 3.3% increase in May. The deceleration was largely a result of lower prices for onions and cucumbers.

Out of 10 Canadian provinces, eight saw prices rising at a faster year-over-year pace in June compared with May. Only British Columbia experienced a slower pace of price growth, and the inflation rate in Alberta wasn’t changed.

Source: Bloomberg Europe

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Source:investing

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Source: Reuters