Politics
JUST IN: Media’s Tariff Narrative Crumbles After Latest Economic Report
Fear over President Donald Trump’s continued tariffs appears to be misplaced, judging by a new inflation report that has economists optimistic about America’s outlook for the remainder of 2025.
Consumer prices increased just 0.1% in May, putting the annual inflation rate at 2.4%. That rise is half of what economists expected.
The Consumer Price Index, or CPI, is a broad-based measure of goods and services that’s often used as a benchmark to survey the state of the economy.
The numbers were great news to President Trump, who tied them to a renewed call for Federal Reserve Chair Jerome Powell to lower interest rates.
“CPI JUST OUT. GREAT NUMBERS! FED SHOULD LOWER ONE FULL POINT. WOULD PAY MUCH LESS INTEREST ON DEBT COMING DUE. SO IMPORTANT!!!” Trump wrote on Truth Social.
Core CPI, which excludes food and energy prices, came in respectively at 0.1% and 2.8%, compared to forecasts by CNBC predicting 0.3% and 2.9%. Officials with the Fed consider core CPI to be a better indicator of long-term economic trends.
All-items CPI ticked up 0.1% from April while core CPI stayed the same, the outlet noted.
Although average gas prices remain around $3.10 per gallon, lower-than-expected demand in the summer months helped push down some of the inflation that economists surveyed had expected to see.
Other goods that were expected to see jumps in prices as a result of tariffs — think cars, apparel, and other retail sectors — actually posted month-over-month declines.
Energy fell 1% since May, while new and used vehicle prices fell 0.3% and 0.5%, respectively. Since the start of the year, gas prices have fallen 12%, with a 2.6% decline since May.
“Today’s below forecast inflation print is reassuring – but only to an extent,” said Seema Shah, chief global strategist at Principal Asset Management. “Tariff-driven price increases may not feed through to the CPI data for a few more months yet, so it is far too premature to assume that the price shock will not materialize.”
Food and shelter prices were on the rise, however. The former rose 0.3%, a “primary factor” in the modest CPI increase. Egg prices fell 2.7% but are still well up from a year ago.
And although shelter prices rose 3.9%, that is still the lowest rate of increase since late 2021.
Vice President J.D. Vance jumped on the news with equal vigor, echoing Trump’s call on Powell to lower rates.
“The president has been saying this for a while, but it’s even more clear: the refusal by the Fed to cut rates is monetary malpractice,” Vance wrote.
Markets absorbed the news with mostly positive reactions. Stocks turned positive at the report’s release while Treasury yields were lower.
The U.S. Bureau of Labor Statistics report comes more than two months after Trump’s “Liberation Day” implementation of across-the-board tariffs on other nations. The change rocked financial markets but has led to a number of deals with other countries.
On Tuesday, the White House announced parameters for a cooled relationship with China following a blistering trade war. Leaders from both countries said they are nearing an agreement that would allow the U.S. to access raw minerals controlled by China, a key resource needed for electric vehicles, iPhones, and other technology-related items.
