Almost 90% Of Americans Concerned About Inflation—Before Tariffs Even Kick In

While 87% of Americans express inflation concerns, official data shows cooling, with CPI at a four-year low of 2.3% in April and core PCE at 2.7% in May. However, experts, including Goldman Sachs, warn that the full impact of tariffs is yet to materialize, projecting core PCE inflation could surge to 3.4% by December. The Federal Reserve has maintained its 4.25%-4.5% interest rate range, resisting calls for cuts, citing caution regarding the potential inflationary effects of these tariffs, highlighting a key policy divergence.

Analysis

A significant divergence has emerged between public sentiment and recent economic data regarding U.S. inflation. While a Reuters/Ipsos poll indicates 87% of Americans are concerned about inflation, official metrics have shown a cooling trend, with the consumer price index (CPI) hitting a four-year low of 2.3% in April and core personal consumption expenditures (PCE) at 2.7% in May. This current disinflationary data, however, is overshadowed by forward-looking risks associated with tariffs. Economists, notably from Goldman Sachs, forecast that the impact of these import taxes has yet to fully manifest, predicting core PCE will accelerate to 3.4% by December—a rate not seen since 2023. In response to these latent inflationary pressures, the Federal Reserve has maintained a hawkish stance, holding its policy rate steady in the 4.25%-4.5% range throughout 2025. This cautious approach, aimed at preempting a tariff-driven price surge, places the central bank in direct conflict with the administration's calls for growth-oriented rate cuts.

Key Decisions for Investors

• Maintain a cautious stance on duration-sensitive assets, as the Federal Reserve is signaling a 'higher for longer' rate policy to counter anticipated tariff-driven inflation.
• Upcoming inflation reports, particularly core PCE, should be scrutinized as the key leading indicator for confirming the tariff passthrough effect and guiding future Fed policy.
• Investors may consider hedging against a potential inflation surprise, given the significant gap between current data and the Goldman Sachs forecast of 3.4% core PCE by year-end.
• Monitor the escalating tension between the administration and the Federal Reserve, as this political friction represents a key source of potential market volatility and policy uncertainty.