Key Takeaways
- The Consumer Price Index rose 2.7% over 12 months in July, while “core” inflation, which excludes volatile prices for food and energy, rose 3.1%.
- The annual inflation rate remained above the Federal Reserve’s goal of 2%.
- President Donald Trump’s far-reaching tariffs had less of an impact on consumer prices than forecasters had anticipated.
The annual inflation rate held steady in July as President Donald Trump’s tariffs had less of an impact on some consumer prices than forecasters expected, but the details showed the key “core” inflation gauge accelerated.
The Bureau of Labor Statistics said Tuesday that prices as measured by the Consumer Price Index rose 2.7% over the last 12 months in July, the same as in June. “Core” inflation, which excludes the volatile prices for food and energy, rose 3.1% over the last year, up from a 2.9% increase in June and reaching the highest since February.
The inflation rate was above the Federal Reserve’s target of a 2% annual rate. The overall inflation rate was less than the 2.8% increase forecasters had expected, according to a survey of economists by Dow Jones Newswires and The Wall Street Journal. The core inflation increase was in line with expectations.
Experts and officials at the Fed closely watch “core” inflation measures because food and gas prices can change sharply for reasons that have little to do with overall inflation trends.
The increase in core inflation was driven by a 0.5% increase in used cars, and 0.8% increases in medical care and transportation services. Air fares jumped 4% after falling for three months.
Energy prices fell 1.1% over the month, with gas prices falling 2.2%, helping to keep the overall inflation rate in check.
“Tariffs are starting to bite consumers, but the impact is modest so far,” Heather Long, chief economist at Navy Federal Credit Union, wrote in a commentary. “While certain goods are clearly seeing tariff-induced price increases, consumers aren’t feeling the pinch in a large way yet, and their budgets are getting relief from lower gas prices.”
Economists have watched inflation data to gauge the impact of Trumpswidespread tariffs on most countriesand products brought into the U.S. from abroad, which he began implementing in February.
Tariffs Nibble, But Don’t Bite
U.S. shippers, businesses and consumers now pay an average of 18.6% in tariffs on imports, the highest tax rate since 1933, according to the Yale Budget Lab. Companies will ultimately pass 67% of those added costs on to consumers, economists at Goldman Sachs led by Elsie Peng estimated this week. Companies were able to delay immediate price hikes by stockpiling inventory ahead of the tariffs, among other tactics.
Prices in some highly tariffed categories rose mildly or not at all: grocery prices were flat in July compared to June despite some food imports facing tariffs. Prices for new cars, which face a 25% tariff on most imports, also didn’t rise at all. Apparel rose 0.1% over the month after a 0.4% increase in June. Appliance prices fell 0.9% after jumping 1.9% in June.
Economists have monitored the “core” commodities category as an indicator of tariff impacts. Core goods prices rose 0.2% in July from June, the same monthly increase as in June but above the average 0% increase since 2023.
“There are clear signs a range of goods prices are moving higher, pushing core goods inflation to a more than two-year high, but some major tariffed items, including autos and major appliances, have yet to show much impact,” Michael Pearce, deputy chief U.S. economist at Oxford Economics, wrote in a commentary.
Update, August 12, 2025—This story has been updated after publication to include more details about the inflation report.
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