Inflation Back in the Spotlight as Tariffs Talks Continue

After a brief sojourn from the roller coaster of tariffs and with a benign report on the labor market last week, the economic focus will shift this week to a problem that once dominated the news: inflation.

There will be two important readings on consumer and wholesale prices, on Wednesday and Friday, respectively. And they come at an important time with the Federal Reserve meeting June 18 to 19. The central bank is not likely to change interest rates at the meeting, but the statement it issues will be parsed for hints of future interest rate cuts.

President Donald Trump ratcheted up the pressure on Fed Chairman Jerome Powell last week with a blast that called for a 1% cut in rates – something that the Fed would never consider in a low unemployment, slow-growth economy in normal times. But with the uncertainty over tariffs prominent, it is a non-starter.

That leaves the data as the main driver of Fed policy. Expectations are for the consumer price index to be unchanged for the month and for the annual rate to increase from 2.3% in April to 2.5%. The core CPI that leaves out often volatile food and energy prices is forecast to rise by 0.3% from 0.2% in April.

The PPI, measuring the gains in prices that companies pay for their supplies, is forecast to increase by 0.2% for the month, after a negative reading in April.

“Inflation data will drive the economic narrative this week,” Comerica Chief Economist Bill Adams wrote in a client note early Monday. “The CPI and PPI probably rose modestly in May due to lower energy prices, while core CPI and PPI likely accelerated as businesses began passing tariffs on to their customers.