Here’s the inflation breakdown for June 2025 — in one chart

The U.S. Consumer Price Index (CPI) rose 2.7% year-over-year in June, up from 2.4% in May, with core inflation (excluding food and energy) at 2.9%. While some categories like gasoline saw price moderation, economists anticipate that the full inflationary impact of the Trump administration's tariffs will increasingly manifest in the second half of the year as businesses deplete pre-tariff inventories and pass on higher import costs. Experts from Wells Fargo and Moody's predict a significant acceleration in consumer prices in the coming months, despite some mixed signals in the current report and more muted longer-term inflation expectations compared to 2022.

Analysis

The U.S. annual inflation rate accelerated to 2.7% in June, up from 2.4% in May, while core inflation, which excludes volatile food and energy, reached 2.9%. This uptick reflects a complex environment with significant cross-currents: moderating factors such as an 8.3% year-over-year decline in gasoline prices and falling vehicle costs were offset by persistent price growth in key categories like groceries (+2.4% YoY) and housing (+3.8% YoY), the latter being the largest contributor to the overall CPI increase. The central theme emerging from economic commentary is the anticipated delayed impact of trade tariffs. Economists from Moody's and Wells Fargo forecast a significant rise in consumer prices in the second half of the year, positing that businesses have so far absorbed import duties by drawing down pre-tariff inventories. As these stockpiles dwindle, firms are expected to pass on higher costs, pushing inflation into a "much higher gear." While longer-term inflation expectations remain below the 9.1% peak seen in 2022, the prevailing consensus points toward a period of stronger, tariff-driven price pressures in the months ahead.

Key Decisions for Investors

• Given the consensus forecast for accelerating inflation driven by tariffs, investors should assess portfolio exposure to inflation-sensitive assets and consider positions in sectors with pricing power.
• Scrutinize companies with high import dependencies, particularly in retail and consumer goods, as they face significant margin risk once pre-tariff inventories are depleted in the second half of the year.
• The persistent rise in core inflation to 2.9% increases the likelihood of a continued hawkish stance from the Federal Reserve, warranting close monitoring of upcoming economic data for potential impacts on monetary policy and asset valuations.
• Note the mixed signals within the report, such as declining vehicle prices and moderating gasoline costs, which could present tactical opportunities in specific sub-sectors even within a broadly inflationary environment.