The latest consumer price index (CPI) and core PCE index reports for June show inflation rising, with CPI up 0.3% and the annual rate reaching 2.7%, while the core PCE index is projected to increase to 2.8%, both above the Federal Reserve's 2% target.

These inflation figures are influenced by tariffs and rising input costs, although the overall impact on inflation has been relatively mild so far.

Despite the tariffs, producer prices at steel mills fell by 5.5%, and wholesale prices for goods increased by 0.3%, driven by sectors like communication equipment, while service prices slightly declined, balancing the overall Producer Price Index (PPI) reading.

Economists note that companies are responding differently to import taxes, with some absorbing costs and others passing them on, which complicates the inflation outlook.

The PPI data indicates sector-specific inflation trends, with increases in consumer-facing categories like furniture and electronics, but weaker demand in services such as travel and accommodation has kept wholesale inflation subdued.

Some companies have been using pre-tariff inventories to stabilize prices, but with stocks running low and new tariffs looming, there could be future price increases.

The upcoming tariffs set for August 1 on imports from countries including Canada, Mexico, and the European Union could further influence prices, especially as inventories of pre-tariff stockpiles deplete.

The Federal Reserve has adopted a cautious stance, having raised interest rates 11 times in 2022 and 2023 to combat inflation, but recent rate cuts suggest they are waiting to see how trade policies affect the economy.

Overall, the inflation landscape remains complex, with tariffs and global trade policies playing significant roles, but the economy shows signs of resilience despite these pressures.

While President Trump has urged for monetary easing, most Fed officials prefer to assess the impact of tariffs and inflation trends before making rate decisions.

Market reactions to the inflation data were positive, with stock futures rising following the report, reflecting investor optimism amid the economic data.