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yesterday

Fed Poised to Hold Rates as May Inflation Stays Tame Despite Tariffs

Economists caution that tariff-driven costs could build pressure on consumer prices later this year, influencing the Fed’s rate outlook.

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Overview

  • The Consumer Price Index rose 0.1% in May and stood 2.4% higher than a year ago, with core inflation excluding food and energy up 0.1% for the month and 2.8% over 12 months.
  • Businesses have largely absorbed the cost of President Trump’s tariffs or drawn down pre-tariff inventories, muting any immediate rise in consumer prices.
  • Federal Reserve officials are expected to keep the benchmark rate at 4.25%–4.5% when the FOMC meets in mid-June, citing uncertainty over trade-related inflation risks.
  • President Trump urged the Fed on Truth Social to cut interest rates by a full percentage point after the CPI data beat forecasts.
  • The United States and China struck a preliminary trade deal covering tariffs and rare earth minerals, though its long-term impact on prices remains unclear.