Inflation Slows Despite Tariff Fears, Surprising Wall Street
So here's the latest economic twist — and it’s one that’s caught a lot of experts off guard. Inflation in the U.S. rose less than expected last month, even though many had been bracing for a bigger surge due to the rising impact of Trump’s recently escalated tariffs. According to new data released by the Bureau of Labor Statistics, the Consumer Price Index (CPI) rose just 0.1% in May. That brings the annual inflation rate to 2.4%, a modest bump from April’s 2.3%, which had been the lowest in four years.
Now, that may sound like a typical number shift, but it’s actually a significant moment. Many economists had forecast a 0.2% monthly increase and a 2.5% annual rate, so this softer result gave markets a bit of a boost. Dow futures rose about 95 points shortly after the data came out. The S&P 500 and Nasdaq futures also climbed — all signs that investors were relieved inflation isn’t flaring up as much as feared.
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The big elephant in the room has been Trump’s tariff policy. Recently, he ramped up U.S. tariffs dramatically, prompting concerns that businesses would pass those higher costs on to consumers. But that impact hasn’t fully shown up in the numbers — yet. That’s a key takeaway. While the CPI did rise slightly, the “core CPI,” which strips out volatile food and energy prices, stayed flat month-over-month at 0.1% and held steady on an annual basis at 2.8%.
So why haven’t the tariffs hit harder? Several reasons. Some businesses bought inventory ahead of time, avoiding higher costs. Others have been discounting to keep customers happy. And in many cases, manufacturers and retailers are absorbing costs — at least for now. As Seema Shah from Principal Asset Management noted, the real price shocks might still be a few months away. She points out that economic data tends to lag, and with trade policies still in flux, we might not see the true inflationary effects until later this summer.
In short, while the current CPI report offers some relief, it’s not time to relax just yet. The economic landscape is still shifting, and inflation could still spike if tariffs continue to ripple through supply chains. For now, though, this latest report gives both markets and consumers a bit of breathing room — and maybe, just maybe, a reason for cautious optimism.
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