Fed’s 2% Goal Faces a Setback: CPI Inflation Rate Expected to Reaccelerate

U.S. inflation has shown progress in 2024, but that trend could stall as new CPI data reflects the impact of tariffs and statistical base...

Written by: Skerdian Meta • Wednesday, June 11, 2025 • 2 min read

• Last updated: Wednesday, June 11, 2025

May CPI to Test Fed's Resolve Amid Tariff Pressures

Quick overview

U.S. inflation has improved in 2024, but new CPI data may indicate a short-term reversal.
The anticipated rise in CPI is largely due to statistical base effects and the impact of tariffs.
The Federal Reserve faces pressure to delay rate cuts despite expected inflation increases.
Policymakers must balance between perceived inflation risks and actual economic conditions.

U.S. inflation has shown progress in 2024, but that trend could stall as new CPI data reflects the impact of tariffs and statistical base effects.

Inflation Cooling May Be Short-Lived

After months of steady improvement, U.S. inflation could face a short-term reversal. The annual headline CPI, which had eased from 3.0% to 2.3% in April, has been a reassuring signal for the Federal Reserve’s inflation-fighting efforts. Core CPI—excluding volatile food and energy categories—has also slipped to a four-year low of 2.8%, encouraging hopes that the central bank is closing in on its 2% target.

However, fresh data expected from the Bureau of Labor Statistics on Wednesday may break that streak. According to forecasts compiled by The Wall Street Journal and Dow Jones Newswires, May’s CPI is likely to show a year-over-year increase of 2.4%. Core CPI is expected to rise slightly to 2.9%. This would mark the first month of acceleration after three straight declines in annual inflation readings.

Base Effects, Tariffs Complicate the Picture

Much of the anticipated uptick is tied not to new economic shocks, but rather to a statistical phenomenon known as the “base effect.” Last May’s 0.0% monthly print will drop out of the annual calculation, making even a modest 0.1% gain this May appear more inflationary. The issue could intensify next month, when a -0.1% reading from June 2024 exits the base, potentially pushing inflation readings higher even without a surge in current prices.

Overlaying this is the added pressure from President Donald Trump’s tariff policy, which is starting to show up in pricing data. While core categories remain relatively stable, the pass-through effects of import duties on consumer goods could disrupt the current disinflationary trend.

Fed Stuck in a Wait-and-See Mode

The Federal Reserve is well aware of these nuances. Still, with inflation expected to rise—at least optically—policymakers are under pressure to delay any rate cuts. Even though markets had previously priced in a potential rate reduction by July, the odds of a cut have now fallen dramatically. Futures pricing reflects almost zero chance of action in June, and only a one-in-six probability in July.

In short, even if the CPI rebound proves temporary, the political optics and market reaction may keep the Fed on hold longer than anticipated. Jerome Powell’s challenge now is navigating between statistical noise and real inflation risk, all while the global economy digests a wave of protectionist trade policies.

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ABOUT THE AUTHOR See More

Skerdian Meta

Lead Analyst

Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.