Inflation is holding steady as Trump’s tariffs have yet to fully hit

Inflation showed little change last month as President Trump’s tariffs have so far not had a big effect on the prices that American shoppers pay.

Consumer prices in May were up 2.4% from a year ago, according to a report Wednesday from the Labor Department. That’s a slightly larger annual increase than the month before.

But prices rose just 0.1% between April and May — down from 0.2% the month before. Falling gasoline prices helped to offset the rising cost of rent and groceries.

Trump’s tariffs may have contributed to the rising price of some goods in May, such as appliances and toys. But overall goods prices held steady last month. Forecasters expect the cost of tariffs to become more evident in the months to come.

The president has imposed an import tax of at least 10% on nearly everything the U.S. buys from other countries, and that tax rate could increase next month, at the conclusion of a 90-day window for trade negotiations.

Federal Reserve governor Adriana Kugler warned that Trump’s tariffs could reverse some of the progress that’s been made on inflation over the last two years.

“We are already seeing the effects of higher tariffs, which I expect will continue to raise inflation over 2025,” Kugler told the Economic Club of New York last week.

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The Fed cut its benchmark interest rates by a full percentage point last year, but the risk that tariffs could rekindle inflation has made the Fed cautious about additional rate cuts, despite persistent urging by the president.

The central bank is widely expected to hold interest rates steady again when Fed policymakers meet next week.

Egg and gas prices fall

Grocery prices rose 0.3% in May. The price of eggs continued to fall, as the nation’s flock of egg-laying hens slowly recovered from a widespread outbreak of avian flu.

While gasoline prices have fallen in recent months, other energy prices are climbing.

Higher electricity prices are expected to boost air conditioning bills by 2.1% this summer, according to a new forecast from the Energy Department, even though average temperatures are expected to be slightly cooler than last year.

Power prices have been pushed higher by strong demand from commercial and industrial customers — including data centers — and by increased exports of natural gas, which is used to generate electricity.

Stripping out volatile food and energy prices, “core inflation” was 2.8% for the 12 months ending in May, unchanged from the 12 months ending in April.