Inflation broadly held steady in May — and by some measures cooled unexpectedly — as price growth data so far showed few signs of President Donald Trump’s tariffs hitting the consumer economy.
The Consumer Price Index, which measures costs of business and services, rose to 2.4% in May from the same month a year ago, the Bureau of Labor Statistics reported Wednesday , up slightly from an annual rate of 2.3% in April. On a monthly basis, prices inched up just 0.1%, less than the 0.2% notched in April and below economists' forecasts of 0.3%.
The closely watched measure of "core" inflation, which strips out food and energy prices that tend to change more, also climbed by a slower 0.1% after rising 0.2% in April. Core inflation remained unchanged on an annual basis at 2.8%.
Surprise price declines in apparel, cars and furniture — categories seen as highly vulnerable to tariffs due to their heavy reliance on foreign suppliers — helped lead the index lower.
Some analysts cautioned that it remains too early to see broad-based evidence of tariffs driving up what consumers pay.
“Tariff-driven price increases may not feed through to the CPI data for a few more months yet, so it is far too premature to assume that the price shock will not materialize,” Seema Shah, chief strategist at Principal Asset Management, said in a note to clients following Wednesday’s report. “We’ll likely need to wait until the late summer before the tariff impacts start to show through — either in the profit margin data or the inflation data.”
The surprisingly soft reading sent stock futures surging in pre-market trading as investors anticipated it could prompt the Federal Reserve to cut interest rates sooner. U.S. government borrowing rates also fell.
Vice President JD Vance cited the fresh CPI report to renew Trump's ongoing, unprecedented pressure campaign on the central bank — an institution traditionally meant to stand apart from politics — to lower interest rates.
"The president has been saying this for a while, but it's even more clear: the refusal by the Fed to cut rates is monetary malpractice," Vance wrote on X Wednesday morning.
The president’s on-again, off-again tariffs and trade-deal announcements have scrambled the spending plans of businesses and households. Surveys have shown weak consumer confidence since April, the month Trump rolled out his “Liberation Day” tariffs that reset baseline import duties to 10% but have been revised continuously since then. Just prior to the inflation report's release, Trump said China tariffs would be set at an all-in rate of 55%.
Trump campaigned on promises to bring immediate price relief to Americans, a vow that he and his allies have appeared to temper in recent months. But economists continue to expect his tariffs to raise prices , and some major companies have already signaled plans to pass at least some the costs of import taxes on to their customers.
Walmart said last month that shoppers would soon start seeing higher sticker prices. The National Federation of Independent Businesses reported Tuesday that a net 31% of its surveyed members planned price hikes last month, up from 28% in April.
“Walmart making their announcement that customers are going to start seeing higher prices really underscores how businesses are starting to feel this,” said Stephen Kates, a financial analyst at the consumer finance company Bankrate. “And if the largest businesses are saying this, smaller businesses are definitely feeling it, too — there’s no way around that fact.”
Walmart responded to Trump’s threats by saying it would “keep prices as low as we can for as long as we can given the reality of small retail margins.”
Price hikes are showing up in other economic data. In May, U.S. factories registered the highest share of price-increase reports since November 2022 , S&P Global, a data and business consultancy group, said last week. And firms quoted in the Institute of Supply Management’s latest manufacturing report noted the president’s tariffs have wreaked havoc on their ability to plan for the future.
If there has been any price relief, it is likely the result of an overall slowing economy, analysts say, with a weakening labor market forcing consumers to cut back on spending. Many consumers are paring back their travel plans to save money , for example, with recent Bank of America data showing spending rates below the levels seen before Trump returned to office.
Past experience suggests the coming months will more fully capture the impact from the tariffs. In a note to clients this week, Pantheon Macroeconomics analysts said it took a full three months before the price increases from Trump’s 2018 washing machine tariffs showed up in data — but that when they did, the pass-through was “rapid and complete.”
That suggests it would take until July for the tariffs — the bulk of which were announced in April — to begin to fully appear.
Even if the pace of price growth is no longer at the pace seen in 2022, when inflation rates reached levels not seen in decades, Bankrate’s Kates said consumers are still going to be left smarting.
“It’s going to be a persistent itch that doesn’t go away,” Kates predicted.
This article was originally published on NBCNews.com