Waiting for the Fed All Summer Long
Inflation is still lurking, and there’s little point getting out too far in front of tariffs.
The Fed might as well take the summer off.
Photographer: Jonathan Blair/Corbis/Getty
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The Federal Reserve might as well take the rest of the summer off and head for the beach. If the sweeping new tariffs are to shift inflation upward, they haven’t done it yet. That’s the clearest conclusion from the US consumer price inflation data for May, which against expectation showed continuing decline, and nevertheless changed market expectations for the Fed barely at all.
May was the first month the Trump 2.0 tariffs were in effect throughout, and yet they had a negligible impact on price rises. That is undeniably good news. But it doesn’t disprove that price rises will eventually come, and the data overall give the Fed no reason to jump in either direction.
Breaking inflation into its four main components — food and energy, and the remaining goods and services — in our regular chart from the ECAN function on the terminal shows minimal change. Services continue to dominate, energy was negative and food positive. Core goods, the most affected by tariffs, saw inflation tick up, but not to a level that’s discernible: