US inflation remains stable: Trump's tariff policy under pressure!

US inflation remains stable: Trump's tariff policy under pressure!

US inflation remains high in July 2025. Consumer prices rose by 2.7 percent compared to the previous year, which represents no change from the previous month. Economists, however, had expected an increase to 2.8 percent. According to the latest data, prices rose by 0.2 percent from June to July. An important key figure is core inflation, which is considered without the volatile prices of energy and food - it increased from 2.9 percent to 3.1 percent. These numbers highlight the ongoing challenges facing the U.S. economy. South German newspaper reports that services inflation is holding steady at 3.6 percent year-on-year, also unchanged from June.

A key factor in this development is President Donald Trump's trade policy. In April, Trump announced high special tariffs on imports, some of which have been suspended for the time being, but a base tariff rate of 10 percent remains. Further tariffs range from 15 percent for goods from the EU to around 50 percent for Indian products. These measures could further increase price increases and harm the purchasing power of US consumers. According to the Federal Reserve (Fed), there will be a need to further analyze the impact of these trade policies on inflation and the labor market. FTD adds that the Fed has kept the interest rate in a range of 4.25 to 4.50 percent since December 2024.

Market developments and Fed policy

The uncertainty about the impact of tariff increases is highlighted by Fed Chairman Jerome Powell's warnings. He has warned that the economic burden of these tariffs could increase. Despite repeated demands from the White House, the Fed refrains from cutting interest rates and fails to respond to Trump's pressure. The president has said he may replace Powell early, whose term officially ends in May 2026.

The latest figures show that just 73,000 new jobs were created in July 2023, well below expectations of 110,000. The revision of the labor market figures for May and June also shows a decline of over 250,000 jobs. The labor market situation therefore remains tense, which puts additional pressure on monetary policy decisions. Trump's personnel policies at the Bureau of Labor Statistics, such as the firing of Erika McEntarfer and the appointment of E.J. Antoni from the Trump camp is another indicator of the closer connection between politics and business.

Forecasts and market expectations

In a recent New York Fed survey, consumers expect inflation to reach 3.1 percent in the next 12 months, up from 3 percent in June. Additionally, the FedWatch tool signals a 90 percent chance of a 0.25 percent rate cut on September 17 and a 62.5 percent chance of another move on October 29. These forecasts reflect growing market expectations for monetary policy adjustments as economic conditions remain challenging.