US core CPI rises less than expected again on drop in car prices

Goods prices, excluding food and energy commodities, rose 0.2% after stalling in the prior month

Underlying US inflation rose in June by less than expected for a fifth month, dragged down especially by car prices.

The consumer price index, excluding the often volatile food and energy categories, increased 0.2% from May, according to Bureau of Labor Statistics data out Tuesday. On an annual basis, it advanced 2.9%.

Goods prices, excluding food and energy commodities, rose 0.2% after stalling in the prior month. Categories that are more exposed to tariffs, including toys, furniture, appliances and apparel, showed strength, suggesting companies are starting to pass higher import costs on to consumers. Meantime, prices of new and used cars declined.

The report marks the fifth straight month of below-forecast inflation readings and raises questions as to how broadly President Donald Trump’s tariffs will impact consumer prices. Some companies have been able to shield customers by stocking up on inventories ahead of the levies or absorbing part of the higher costs at the expense of lower margins.

The weaker-than-expected number could draw even greater calls from Trump for the Federal Reserve to lower interest rates. While some officials have expressed willingness to cut rates when the central bank meets in two weeks, policymakers generally are still divided as to whether tariffs will cause a one-time price shock or something more persistent and will probably stay on hold again.

Stock futures remained higher, Treasury yields fluctuated and the dollar was lower after the report.