Increase in Consumer Price Index: A 3.1% spike observed compared to last year's figures
In a significant development, the core inflation rate has dropped three tenths of one percent, according to recent data. This drop may lead to a decrease in interest rates, as it suggests that inflation is no longer a major concern for the economy.
The tariffs imposed by President Trump have had a mixed but generally moderate impact on inflation, particularly on consumer goods and services. While tariffs initially raised costs on imported goods, these increases have not caused a significant surge in overall U.S. inflation so far. This is partly due to some tariff rate reductions and ongoing trade negotiations with countries like Japan, Korea, and India.
However, economists warn that prices on consumer goods could still rise later in 2025 if trade tensions persist or escalate again. A 5% permanent tariff rate scenario is projected to potentially reduce the core Consumer Price Index (CPI) for 2025, suggesting some stabilization or dampening of inflation growth this year rather than acceleration.
The July data indicates a trend of businesses no longer absorbing the costs of tariffs to avoid driving away customers. This is evident in categories such as furniture, appliances, household wares, recreation goods, and footwear, where the biggest impact of the tariffs has been seen.
The drop in the core inflation rate may provide relief to businesses that have been struggling with higher costs due to tariffs. The uncertain trade environment and talks about trade deals have affected market sentiment but not led to broad price spikes on consumer goods or services yet.
On the other hand, the CPI-E Act, if passed, would make Social Security cost of living adjustments more accurate for seniors. Congressman John Garamendi (D-CA) introduced H.R. 1251, the CPI-E Act of 2017, to make Social Security fairer to seniors by requiring the program to use the Consumer Price Index for the Elderly to calculate cost of living adjustments.
In July, the Consumer Price Index (CPI) showed a pronounced cooling. The year-over-year increase in "Core" CPI was 3.1 percent, which is one of the largest monthly increases this year. This represents the fastest annual pace in five months. The drop in the core inflation rate may suggest that the Federal Reserve's efforts to tame inflation are starting to have an effect.
On August 12, 2025, the "Core" Consumer Price Index (CPI) rose by 0.3 percent over the month, marking a slower pace compared to July's increase. This drop in the core inflation rate, coupled with the July data showing businesses passing along tariff-related costs to their customers after a prolonged period of muted price gains, provides a more nuanced picture of the current state of inflation.
In summary, while Trump's tariffs have not caused a sharp inflation surge on consumer goods or services, vigilance remains necessary as the situation could change depending on trade developments and economic conditions. The drop in the core inflation rate offers hope that the Federal Reserve's efforts to tame inflation are starting to bear fruit, but the potential for further inflationary pressures tied to tariffs should not be ignored.
Community news reports suggest that the drop in the core inflation rate could provide a relief for businesses struggling with higher costs due to tariffs, particularly in sectors like furniture, appliances, and footwear. Business leaders are closely monitoring events related to ongoing trade negotiations and potential tariff rate changes, as these developments could significantly impact their financial standing.
