US consumer inflation accelerated in June as the effects of President Donald Trump's tariffs began to filter through to households.
The consumer price index (CPI) rose last month by a 2.7pc annual pace after rising by 2.4pc in May, the Bureau of Labor Statistics said Tuesday. June's gain was in line with expectations of economists surveyed by Trading Economics. So called core inflation, which strips out volatile food and energy, rose in June at a 2.9pc annual pace after a 2.8pc gain in May.
The energy index fell by 0.8pc in the 12 months through June, slowing from May's 3.5pc drop. The food index rose in June at a 3pc pace after a 2.9pc gain in May.
Annual price gains in consumer goods included 4pc for window and floor coverings, 3.7pc for nonelectric cookware and 1.9pc for appliances.
The CME's FedWatch tool after the inflation report showed a 97.4pc probability the Federal Reserve will hold its target lending rate unchanged at 4.25-4.5pc at its meeting later this month, up from 93.8pc on Monday. The likelihood of a September rate cut was 55.8pc following the report.
The Fed has repeatedly said it will continue to monitor the effects of Trump's tariff and fiscal policies before cutting rates further. Rising inflation in June appears to validate the Fed's cautious stance toward adjusting borrowing costs.
Services less energy services, viewed as a core services measure, rose by 3.6pc in the 12 months through June, unchanged from May.
Gasoline fell in June at an 8.3pc annual pace while piped gas services rose by 14.2pc.
Shelter costs rose by 3.8pc, and new vehicle prices rose at a 0.2pc annual pace.
On a monthly basis, the CPI rose by 0.3pc in June, the highest since January, following a 0.1pc uptick in May.
