US inflation picked up slightly last month as food costs rose, though overall inflation remained mostly tame.
Consumer prices increased 2.4% in May compared with a year ago, according to a Labor Department report released on Wednesday. That's up from a 2.3% yearly increase in April.
Excluding the volatile food and energy categories, core prices rose 2.8% for the third straight month. Economists pay close attention to core prices because they generally provide a better sense of where inflation is headed.
The figures suggest inflation remains stubbornly above the Federal Reserve’s 2% target, which makes it less likely that the central bank will cut its key short-term interest rate. Trump has repeatedly urged the central bank to reduce borrowing costs.
Given the potential for higher prices in the coming months, Fed Chair Jerome Powell and other Fed officials have made clear they will keep their key rate unchanged until they have a better sense of how tariffs will affect the economy.
Last week, the Labor Department’s Bureau of Labor Statistics, which compiles the inflation data, said it was reducing the amount of data it collects for each inflation report. Economists have expressed concern about the cutback, and while it isn’t clear how sharp the reduction is, most analysts say it is likely to have a minor impact. Still, any reduction in data collection could make the figures more volatile.
Trump's tariffs are expected to push up prices in the coming months by raising the cost of some imports, including clothes, furniture, appliances, and possibly new cars. Many retailers and some consumer product companies have said they have plans to raise prices — or have already done — so to cover the cost of the import duties.
Inflation has nonetheless eased in the past year and, excluding the impact of tariffs, economists say it would be on track to return to the Fed's target. Yet core prices have been more stubborn and were stuck between 3.2% and 3.4% for nearly a year until February, when they started to decline marginally.
The full impact of the tariffs likely won't be felt until the second half of the year, analysts say, even though many tariffs have been in place, in one form or another, since March and April. There are several reasons it can take months for the duties to fully pass through into retail prices.
To begin with, many companies tried to beat the clock by bringing in foreign goods before Trump’s tariffs took effect, producing a flood of imports in March. As a result, they have stockpiled goods in warehouses that weren't hit by tariffs and so don't have to raise prices yet.
Many companies also held off on hiking prices during the chaos of April and May, when Trump announced sweeping tariffs on imports from nearly 60 countries, only to put them on hold a week later. He also ramped up duties on China to 145%, essentially cutting off trade with the United States' third-largest trading partner. Imports fell sharply in April as a result. The US and China last month agreed to lower duties, bringing them to 30% on imports from China.
Many firms believed it wasn't worth raising prices until they had a better sense of where tariffs would settle.
