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US inflation picks up in June; consumer spending rises moderately
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US inflation picks up in June; consumer spending rises moderately
Jul 31, 2025 6:17 AM

WASHINGTON (Reuters) -U.S. inflation increased in June as tariffs on imports started raising the cost of some goods, supporting economists' expectations that price pressures would pick up in the second half of the year.

The personal consumption expenditures (PCE) price index rose 0.3% last month after an upwardly revised 0.2% gain in May, the Commerce Department's Bureau of Economic Analysis said on Thursday. Economists polled by Reuters had forecast the PCE price index climbing 0.3% following a previously reported 0.1% rise in May. In the 12 months through June, the PCE price index advanced 2.6% after increasing 2.4% in May.

The data was included in the advance gross domestic product report for the second quarter published on Wednesday, which showed inflation cooling, though remaining above the Federal Reserve's 2% target. Economists said businesses were still selling inventory accumulated before President Donald Trump's sweeping import duties came into effect.

They expected goods prices to rise in the second half, with businesses passing on the higher costs from import duties to consumers. Procter & Gamble said this week it would raise prices on some products in the U.S. to offset tariff costs.

The U.S. central bank tracks the PCE price measures for monetary policy. The Fed on Wednesday left its benchmark interest rate in the 4.25%-4.50% range, where it has been since December, resisting pressure from Trump to lower borrowing costs. Economists expect the Fed to resume easing monetary policy in September.

Fed Chair Jerome Powell, responding to questions from reporters on the anticipated tariff-related price increases, said "a reasonable base case is that these are one-time price effects," but added "I think we've learned that the process will probably be slower than expected" and take time to fully understand.

Excluding the volatile food and energy components, the PCE price index increased 0.3% last month after rising 0.2% in May. In the 12 months through June, the so-called core inflation advanced 2.8% after rising by the same margin in May.

The BEA also reported that consumer spending, which accounts for more than two-thirds of economic activity, rose 0.3% in June after being unchanged in May. The data was also included in the advance GDP report, which showed consumer spending growing at a 1.4% annualized rate after almost stalling in the first quarter.

In the second quarter, economic growth rebounded at a 3.0% rate, boosted by a sharp reduction in the trade deficit because of fewer imports relative to the record surge in the January-March quarter. The economy contracted at a 0.5% pace in the first three months of the year.

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