June CPI Shocker: Inflation Jumps to 2.7%, Markets Rethink Fed Rate Cut Timeline

July 15, 2025: The annual inflation rate in the U.S. accelerated to 2.7% in June 2025, up from 2.4% in May, marking its highest level since February and signaling a second consecutive month of rising price pressures, the Bureau of Labor Statistics reported. This increase aligns with expectations and was driven largely by shelter costs (+0.2%) and a 1% rise in gasoline prices.

On a monthly basis, the Consumer Price Index (CPI) rose 0.3%, the largest increase in five months, up from 0.1% in May. The core CPI, which excludes food and energy, rose 0.2% month-over-month and 2.9% year-over-year—its first uptick after three months at 2.8%, though still below the 3% forecast.

Since December, the Federal Reserve has paused interest rate cuts. Fed Chair Jerome Powell continues to advocate a “wait-and-see” approach, especially as new tariffs take effect. President Donald Trump has recently imposed or announced steep tariffs:

• 35% on Canadian imports (effective August 1)
• 30% on European Union goods (also effective August 1)
• Plans for blanket tariffs of 15% to 20% on most trading partners.

While the White House dismisses concerns, Goldman Sachs predicts these tariffs could push inflation up to 3.8% by December, the highest since 2023. Retailers like Walmart have warned that tariffs will force price hikes, despite prior relief from Chinese duties.

Meanwhile, a formal process is reportedly underway to replace Powell as Fed Chair, according to U.S. Treasury Secretary Scott Bessent, who suggested keeping Powell on could create confusion when his tenure ends.

The U.S. labor market remains strong, with unemployment dropping to 4.1% and 147,000 jobs added in June, though much of the growth was reportedly fueled by government hiring.

The Fed’s preferred inflation gauge remains the core Personal Consumption Expenditures (PCE) index, which will further influence decisions at the upcoming FOMC meeting on July 29–30.