As More Tariffs Pass Through, U.S Inflation Will Rise

After a period of muted inflation, U.S. consumers likely experienced a modest uptick in prices during June as companies began passing on higher costs related to imported goods affected by tariffs.

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According to a Bloomberg survey of economists, core consumer prices—which exclude food and energy—rose by 0.3% last month, marking the largest monthly increase in five months. This compares with a smaller 0.1% rise in May.

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This core inflation measure, seen as a more accurate reflection of underlying price pressures, is projected to climb on an annual basis for the first time since January, reaching 2.9%. While the upcoming inflation report on Tuesday is expected to show only a partial pass-through of higher import tariffs, many economists anticipate inflation to gradually rise through the rest of the year.

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However, with the job market showing signs of cooling, retailers remain cautious about raising prices too aggressively, as consumers appear to be spending more conservatively.

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Retail sales figures, scheduled for release on Thursday, are expected to reflect only a slight rebound in June after declining for two consecutive months. Since these data primarily track goods consumption, they will offer valuable insight into the strength of household demand and help refine estimates for second-quarter GDP growth.

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Despite the slowdown in both consumer demand and labor market momentum, the Federal Reserve has refrained from cutting interest rates, concerned that tariff-driven price increases could fuel broader inflationary pressures. The Fed’s next policy meeting is set for July 29-30.

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In the week ahead, the Federal Reserve will release its Beige Book on Wednesday, which compiles anecdotal evidence on regional economic conditions. Investors will also be paying close attention to public remarks from several Fed officials, including Governors Christopher Waller, Adriana Kugler, and Lisa Cook.

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North of the border, Statistics Canada will publish its second inflation report ahead of the Bank of Canada’s rate decision on July 30. While core inflation in Canada had been rising earlier this year, it eased to 3% in May. The central bank is watching these trends closely as it considers its next move.

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Globally, the upcoming Group of 20 (G-20) meeting of finance ministers and central bank leaders in South Africa will be a major event. The meeting—only the second under South Africa’s rotating presidency—comes amid escalating U.S. tariff threats and a notable absence: U.S. Treasury Secretary Scott Bessent. Washington has voiced its displeasure with South Africa’s chosen themes of “Solidarity, Equality and Sustainability,” as well as with aspects of its foreign policy.

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In Asia, a flurry of economic data from Japan and China will dominate the week. On Monday, China will publish trade data offering insights into the impact of U.S. tariffs and any potential front-loading of shipments. Tuesday brings more critical releases: China’s June retail sales, unemployment rate, and second-quarter GDP—expected to slow to 5.3%. Industrial production figures will provide further clues to the health of China’s economy.

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Japan will release data on core machinery orders and finalized industrial production for May on Monday, both expected to reinforce signs of softening momentum. Trade data on Thursday is also forecasted to be weak. By Friday, inflation figures are expected to show Japan’s national consumer price index slowed to 3.3% in June, underlining the Bank of Japan’s ongoing policy challenges.

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Elsewhere in Asia, India will publish June export figures on Tuesday, with inflation numbers coming Monday. Malaysia will reveal second-quarter GDP and trade figures following weak data in May. Singapore’s economy likely grew just 0.8% last quarter, while South Korea may continue to experience price weakness in its trade data. Indonesia’s central bank is expected to cut rates as well.

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In Europe, the G-20 finance gathering remains the main regional event, though attention will also be on the U.K., where concerns about public finances are rising following weak GDP numbers for May. On Tuesday, Chancellor Rachel Reeves and Bank of England Governor Andrew Bailey will give high-profile speeches. The U.K.’s June inflation report is due Wednesday, with expectations that the headline rate will remain above 3% and services inflation will ease only slightly to 4.6%. Labor market data on Thursday is anticipated to show slowing wage pressures.

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In the euro area, Tuesday’s highlights include industrial production and Germany’s ZEW investor sentiment index. Trade figures from the broader region, along with Switzerland, will be released later in the week and may reflect disruptions stemming from U.S. tariffs. European Central Bank policymakers are expected to be mostly quiet, though governors from France and Croatia are scheduled to speak.

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In Israel, June inflation is forecast to remain steady at 3.1%, still above the central bank’s target. This could discourage any immediate rate cuts. In the Democratic Republic of Congo, policymakers may reduce borrowing costs for the first time since 2022, given its high inflation-adjusted rate. Angola is expected to hold its benchmark rate at 19.5% on Friday, amid concerns about inflation stemming from recent increases in diesel prices and public transport fares.

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Turning to Latin America, Brazil’s May output figures—due Monday—are expected to confirm a further slowdown as interest rates near their highest in nearly two decades. While a 16th straight quarter of economic growth is still possible, President Trump’s proposed 50% tariffs could tip the country into recession in the second half of the year.

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Peru and Colombia will also publish economic activity data. Although Trump’s latest trade actions have mostly spared them, Peru’s significant copper exports could face challenges if 50% tariffs are imposed. Still, copper’s critical role in industrial applications could keep demand resilient. Argentina, meanwhile, is likely to report its 14th consecutive month of declining annual inflation, potentially dropping below 40%. Following a 1.5% rise in May prices, economists project a slightly higher 1.8% monthly gain for June.

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