World News | Key US Inflation Gauge Rose Last Month as Trump's Tariffs Lifted Goods Prices

Washington, Jul 31 (AP) The Federal Reserve's preferred inflation gauge ticked higher last month in a sign that President Donald Trump's broad-based tariffs are starting to lift prices for many goods.

Prices rose 2.6 per cent in June compared with a year ago, the Commerce Department said Thursday, up from an annual pace of 2.4 per cent in May. Excluding the volatile food and energy categories, prices rose 2.8 per cent in the past year, the same as the previous month, which was revised higher.

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The figures are above the Fed's 2 per cent goal.

The uptick in prices helps explain the central bank's reluctance to cut its key interest rate this week, despite repeated demands from Trump that it do so. On Wednesday, the Fed left its key rate unchanged at 4.3 per cent, and Chair Fed Powell suggested it could take months for the central bank to determine whether the import duties will cause just a one-time rise in prices or a more persistent increase in inflation.

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On a monthly basis, prices ticked up 0.3 per cent from May to June, while core prices also rose 0.3 per cent. Both figures are higher than the 2 per cent target.

The government's measure of gas prices jumped 0.9 per cent from May to June, while grocery costs rose 0.3 per cent. Many longer-lasting goods that are heavily imported saw clear price increases, with furniture prices up 1.3 per cent just last month, appliances up 1.9 per cent, and computers up 1.4 per cent.

The cost of some services fell dramatically last month, offsetting the price pressures from goods. Air fares dropped 0.7 per cent from May to June, while the cost of hotel rooms plunged 3.6 per cent just in one month.

Thursday's report also showed that consumer spending rose 0.3 per cent from May to June, a modest rise that suggests Americans are still spending cautiously. Adjusted for inflation, the increase was just 0.1 per cent, the government said.

Consumers have been cautious all year. On Wednesday, the government said the economy expanded at a 3 per cent annual rate in the second quarter, a solid showing but one that masked some red flags.

Consumer spending, for example, rose at a lackluster 1.4 per cent pace, after an even smaller gain of 0.5 per cent in the first three months of the year. A sharp drop in imports in the April-June quarter, which followed a surge in the first quarter, provided a big lift to the government's calculation of US gross domestic product.

Earlier this month, the government reported that its more closely-watched consumer price index, its primary inflation measure, also ticked higher in June as the cost of heavily-imported items such as appliances, furniture, and toys increased. (AP)

(The above story is verified and authored by Press Trust of India (PTI) staff. PTI, India’s premier news agency, employs more than 400 journalists and 500 stringers to cover almost every district and small town in India.. The views appearing in the above post do not reflect the opinions of LatestLY)