Chart of the week

Whether looking at headline inflation or core inflation, June's figures aligned closely with expectations, rising by +0.3% and +0.2% month-over-month, respectively. However, a closer examination of the data indicates that the effects of tariffs are beginning to appear.

Some prices have declined, such as those for vehicles—both new and used—as well as certain services like lodging. The drop in auto prices can be largely attributed to a sales downturn since March. Many buyers had anticipated tariff-related price hikes, pushing new car sales to their highest levels since 2021 earlier in the year. Three months later, June sales are down 13%. Looking at prices for goods excluding vehicles, these rose by 0.6%, driven primarily by rising costs for home furnishings and electronics. This marks the fastest pace of growth since 2022.

Our analysis

Regional Federal Reserve branches have been surveying businesses to gauge the impact of tariffs on pricing. The general consensus is that it may take a few months for the full effects to show up. Some businesses may have chosen to absorb the initial tariff increases, possibly betting on further concessions from the U.S. government. According to the latest updates, ongoing trade negotiations suggest average tariffs will settle between 15% and 20%. As a result, the effects of these tariff hikes are expected to become increasingly evident in the months ahead.