A key report is expected on Tuesday to show that the inflation rate increased in July, a possible indication that the rates of President Donald Trump weigh more and more in consumers.
Trump’s reaction to the report, especially if it shows that inflation is heated, could be even more important after shooting the federal agency’s head behind the data.
Trump accused the senior official of the Office of Labor Statistics, Erika Mtntarfer, to allow the agency to manipulate job data, an accusation that has no basis. His dismissal last week has generated alarms in Washington and among most conventional economists, who say they could affect the integrity of the labor department data. While the data are routinely subject to reviews, there is no evidence that the changes are politically motivated.
A BLS spokesman said that the consumer price index report on Tuesday, which measures the growth of prices paid by consumers, would not be affected by the expulsion of MTENARFER. Official changes have not been announced in their methodology last week.
The president is particularly connected to the data now in the midst of growing signs that his unprecedented rate strategy is altering the economy. Although he argues that commercial duties are making the United States “strong and rich”, the recent growth of employment has been anemic and increasingly concentrated in a narrow set of sectors such as medical care and the state and local government.
The impact on consumer prices seems to be even more pronounced. Tariffs are taxes raised by the government of imported goods, hundreds of billions of which flow to the US.
There has been a debate about who ends in the cost of import taxes, which economists in agreement are presented as inflation. Analysts with Goldman Sachs now estimate that consumers paid approximately 22% of tariff costs until June. In a note for customers, they said that this figure could rise up to 67% by the end of the year, since the companies and supply chains are adjusted to the new regime. In that scenario, a separate inflation measure preferred by the Federal Reserve would increase to 3.2% in December, far ahead of the official 2% target of the Central Bank, analysts said.
Some economists are now raising the possibility that tariffs push the economy of the United States towards stagflation, where the labor market weakens even when price growth is accelerated.
This is considered one of the worst scenarios for the Federal Reserve, which the Congress commissioned to keep low unemployment and the low inflation rate. The president of the Fed, Jerome Powell, has indicated that if it were not for Trump’s tariffs, the Fed would have already reduced interest rates to make loans in the economy cheaper and, therefore, would help boost employment.
Under current conditions, with the increase in price pressures, cut -off rates become more difficult.
“In a scamming environment, it is dangerous to cut without clear evidence that inflation has reached its maximum point,” Bank of America economists wrote in a recent note to customers. In other words, the reduction of rates too soon runs the risk of stealing inflation pressures further by increasing general economic activity.
Two of Trump’s named Fed have a different opinion. In the comments delivered on Saturday, Michele Bowman, Vice President of Supervision of the FED, said that any inflationary impact of tariffs should be considered a “unique”, and that excluding those effects reveals a price growth rate that is much more subjected. Governor Fed Chistopoher Waller offered a similar opinion earlier this month.
“The practice of standard central banking is’ to look through such effects at the price level provided that inflation expectations are anchored, which they are,” Waller said.
That point of view is not shared by Powell, who said it is not clear if the inflationary impact of tariffs will turn out to be short -lived.
“It is also possible that inflationary effects can be more persistent,” he said in the testimony of Congress in June. “Avoiding that result will depend on the size of the tariff effects, how long it takes them to completely go to prices and, ultimately, to maintain the expectations of longer term inflation well anchored.”
Some economists estimate that the impact of tariffs could take up to 18 months to make their way completely through the economy.
“Most of the effects are still ahead of us,” said Diane Swonk, chief economist of the KMPG consulting firm, to the “Today today.”
Beyond tariffs, consumers continue to feel the pinch of high prices in a variety of fronts, something that the president promised to address in the campaign last year. Ground meat prices are now in a historical maximum since droughts have devastated flock counts. Electricity prices are also now in records, while owners insurance costs have also begun to react. Although the weekly profits adjusted by inflation increased the last quarter, approximately 43% of the workers saw that their payment checks grew less than the cost of living from June according to in fact, and most are concentrated at the low extreme of the salary spectrum, according to really.
A separate measure of current and future family financial situations tracked by the Research and Consulting Group of the Conference Board deteriorated in July, with the proportion of consumers waiting for a recession in the next 12 months still above the levels observed in 2024.
Last month, CNBC tracked 50 articles price movements in Walmart, finding that some have increased by up to 50%. Walmart said that “price fluctuations are a normal business course and are influenced by a variety of factors.”
Earlier this year, a Walmart executive was more direct about impact tariffs.
“We are connected to low prices every day, but the magnitude of these increases is more than any retailer can absorb,” said financial director John David Rainey to CNBC in May.
