❓WHAT HAPPENED: Inflation in July held steady, with the Federal Reserve’s preferred price gauge showing a slight deceleration in cost pressures, defying earlier predictions of tariff-driven price increases.
👤WHO WAS INVOLVED: President Donald J. Trump, the Federal Reserve led by Chairman Jerome Powell, and the Bureau of Economic Analysis.
📍WHEN & WHERE: Data for July 2025, released by the Bureau of Economic Analysis on Friday.
🎯IMPACT: Despite fearmongering over tariffs, inflationary pressures have remained manageable, with consumer prices for goods showing minimal increases.
Inflation in July remained muted, with the personal consumption expenditures price index rising 2.6 percent from a year earlier, matching June’s annual pace. Monthly inflation rose by 0.2 percent, slightly down from the previous month’s 0.3 percent increase, according to data released by the Bureau of Economic Analysis.
Core prices, which exclude food and energy costs, increased by 2.9 percent annually and 0.3 percent for the month, aligning with Wall Street expectations. Services prices, the primary driver of inflation, rose 3.6 percent annually, while goods prices increased by just 0.5 percent.
Meanwhile, goods prices fell 0.1 percent in July, with energy costs dropping 1.1 percent and durable goods declining 0.1 percent. Over the past year, energy prices have dropped 2.7 percent, while durable goods prices rose modestly by 1.1 percent. These figures challenge earlier warnings from Federal Reserve officials about the inflationary effects of tariffs.
Fed Chairman Jerome Powell previously stated, “Tariffs are highly likely to generate at least a temporary rise in inflation,” and warned of potentially persistent inflationary effects. However, consumer prices for durable and nondurable goods—the categories most affected by tariffs—have shown minimal increases despite trade tensions.
Consumer spending increased by 0.5 percent in July, driven by purchases of motor vehicles, financial services, and housing-related expenses. Personal income rose 0.4 percent, reflecting higher wages and employer contributions to employee benefits. After taxes and inflation, real disposable income edged up by 0.2 percent, providing consumers with modest additional purchasing power.
The National Pulse reported last week that a new Congressional Budget Office (CBO) analysis projects President Donald J. Trump’s tariff policies could slash federal deficits by $4 trillion over the next decade through increased revenue.
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