US inflation rose in June 2025, matching market expectations but showing signs of pressure from new tariffs. The Consumer Price Index (CPI) increased by 2.7% year-over-year, slightly above the 2.6% forecast. This marks the highest annual inflation rate since February. On a monthly basis, prices rose 0.3%, up from 0.1% in May.
Core inflation, which excludes volatile food and energy costs, remained stable at 2.9% year-over-year. However, the monthly core CPI rose by just 0.2%, slightly below the expected 0.3%. This was the fifth straight month that core inflation came in softer than expected, driven in part by falling prices for used cars and other durable goods.
Tariff Impact Starting to Show
Economists say the recent uptick in headline inflation reflects the early impact of President Trump’s new round of global tariffs. While some goods like toys, clothing, and furniture have seen price increases, many companies have absorbed the higher costs or stocked up early to avoid passing them on to consumers. This has helped keep overall inflation contained for now.
However, experts warn that if the next round of tariffs — particularly those targeting the European Union — begins on August 1, inflation could climb further. This has raised concerns about stagflation, a situation where inflation rises while economic growth slows.
Fed Likely to Stay on Hold
The latest CPI data makes it less likely that the Federal Reserve will cut interest rates at its next meeting. Officials at the Fed remain divided. Some members support easing if inflation weakens or the job market slows, but others believe the current inflation trend is temporary and not enough to justify a rate cut. For now, the Fed is expected to keep interest rates steady and wait for more data.
Market Reactions and Treasury Moves
Market reactions to the inflation report were mostly calm. US stock futures held their gains, while the US dollar slipped slightly. Treasury yields moved in different directions — the 10-year Treasury yield fell by 2 basis points to 4.407%, while the yield curve between 2-year and 10-year bonds steepened to a positive 50.5 basis points. This signals some investor optimism about longer-term growth.
Meanwhile, Treasury Secretary Scott Bessent said the deadline for the current US-China tariff truce could be extended, offering a possible relief to global markets if tensions ease.
Key Takeaways:
US CPI rose 2.7% YoY in June; core CPI held at 2.9%.
Inflation pressures reflect early effects of new Trump tariffs.
The Fed is likely to keep interest rates unchanged.
Market response was muted; bond yields showed mixed signals.
Trump Urges Fed to Cut Rates by 3%, Cites Low Inflation and $1 Trillion in Potential Savings
Trump said that consumer prices are low and it’s time for the Federal Reserve to cut interest rates. He suggested a big rate cut of 3 percentage points, claiming that inflation is very low and such a move could save the country $1 trillion each year.
US 30-Year Treasury Yield Rises to Highest Since May
The 30-year US Treasury yield has climbed back above 5.00% for the first time in a month, reaching 5.01%—its highest since late May. It was last up 3.2 basis points at 5.003%. Meanwhile, the 10-year yield is nearing 4.50%, now less than 15 basis points below the levels seen in April when Trump temporarily paused tariffs for 90 days.
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