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Inflation stabilized in July as prices for staples such as groceries and gasoline fell, helping to offset rising consumer prices.
But there were concerning signs beneath the surface, including evidence that Trump administration’s policies were robbing inflation for certain goods and services, the economist said. These effects are likely to become more pronounced later this year, they said.
“The tariff and immigration policy fingerprints are found throughout the report,” said Mark Zandy, Moody’s chief economist.
“The effects of tariffs and immigration are not screaming at us, but they certainly are talking so loudly that we will start screaming for the next few months,” Zandi said.
The consumer price index rose 2.7% in July compared to a year ago, and has not changed since the previous month and is less than expected, the Bureau of Labor Statistics reported Tuesday.
CPI is a widely used measure of inflation that tracks how quickly the prices of baskets of goods and services rise or rise, from haircuts to coffee, clothing and concert tickets.
CPI data shows that in July, groceries and gasoline prices fell by 0.1% and 2.2% each month since June.
Economists like to see inflation data that removes energy and food prices that can fluctuate from month to month.
This so-called “core” CPI figure has been rising in recent months. It rose 3.1% between July 2025 and July 2025. This is the fastest annual rate for CORE CPI since February, up from a 2.9% annual pace in June.
“[W]Michael Pierce, assistant chief economist for Oxford Economists, wrote Tuesday.
Most obvious inflation in consumer goods
Duties are taxes imposed on imports, paid by US companies that import goods or services.
Companies generally pass these higher costs to consumers, at least in part, on the other hand, the economist said. Yale University’s Budget Institute estimates that as of August 6, the average household will lose $2,400 in the short term as a result of all the tariffs introduced by the Trump administration.
Zandi said the impact of prices is most obvious in product prices, just like home furniture and apparel.
According to CPI data, inflation for all “core” products, which remove food and energy products, has increased by 0.2% in each of the last two months. At more typical times, commodity prices generally remain flat or fall, Zandi said.
“Their increasing numbers are clear evidence of the impact of tariffs,” Zandi said.
According to CPI data, home furniture prices rose 0.7% each month in July. Apparel prices increased by 0.1%, while toys rose by 0.2%.
Not a “one month event”
Every year, inflation in “core” products increased by 1.2% in July, the fastest pace in over two years.
“There are clear indications that the range of commodity prices is moving high, pushing inflation in core goods to a height of over two years, but some key tariff items, including cars and major appliances, have yet to show a major impact,” Pierce wrote.
Stephen Milan, chairman of the White House Economic Advisors Council, said on CNBC’s “street scorching” on Tuesday that CPI data showed “no evidence” that tariffs had increased consumer prices.
“It’s just not panning out,” Milan said.
Economists say the full effect of tariffs will be felt for months as companies delay the transfer of higher costs.
“This is not a month’s event,” said Sarah House, senior economist at Wells Fargo Economics. “The impact will drag over months as businesses wait to see where those tariffs settle.”
They may slowly test consumer price sensitivity at once, she said. Economists say businesses may still be selling old stocks that are not subject to import duties.
“It was a very dynamic period for these trade negotiations…but we’re still a way to get away from seeing places where things settle,” Federal Reserve Chairman Jerome Powell said last month.
Additionally, there is evidence that Trump administration policies on immigration are limiting the supply of migrant labor in certain sectors of the economy and putting upward pressure on inflation, Zandi said.
This is most prominent in personal care services (categories such as haircuts, dry cleaning, pet services) that employ many migrants. He said that fewer immigrants working in these sectors will limit the supply of labor and puts upward pressure on the wages companies pay to attract workers.
