Sen. Rick Scott, R-Fla., celebrated the July report the day of its release.
“Another month of inflation coming in lighter than expected. That’s GREAT NEWS for Florida families, and another reminder to trust in Pres. Trump!” Scott posted Aug. 12 on X, alongside a short Fox Business clip about energy and gas price decreases.
U.S. Rep Kathy Castor, D-Fla., had a different take.
Overall, the report’s numbers are “another dose of modest bad news,” said Douglas Holtz-Eakin, president of the center-right policy institute American Action Forum. “It’s not dramatic yet, it’s not a crisis, but it’s not positive.”
Trump’s tariffs, widely watched to see how they affect consumer prices and inflation, are still new and some just went into effect in August.
“Since at least 2021 the CPI reports have become a partisan battle ground with both sides cherry picking the data to best support their argument,” said Jason Furman, an economist and professor at Harvard University’s John F. Kennedy School of Government who previously served as an economic adviser to former President Barack Obama. “And there is so much data in the CPI report that there is always some way to slice and dice it to support just about any view.”
The consumer price index report and its meaning
For July, the consumer price index increased 0.2% compared with the previous month and 2.7% from a year ago. That’s slightly cooler than the 2.8% rise economists had forecast, thanks to declines in gasoline and energy prices.
Gary Burtless, senior fellow at the Brookings Institution, said the 2.7% 12-month rise in consumer prices for all items is a “bit lower than it was at the start of 2025,” to Trump’s advantage. But the number is also a bit higher than it was from March to July, he said, an advantage for Trump’s critics.
A separate measure, core inflation — which excludes food and energy because they are considered volatile measures prone to large, rapid fluctuations — increased 0.3% for July and 3.1% from a year ago. This is the first time annual core inflation, which officials use to monitor underlying, longer-term inflation trends, has risen above 3% in several months. This outpaces Federal Reserve projections before the 2024 election, which projected 2.2% median core inflation for 2025.
“Economists tend to focus on the core because it is less erratic than food and energy prices,” said Dean Baker, co-founder of the liberal Center for Economic and Policy Research. “Food and energy prices are very important, but big changes in either direction tend to be reversed. Therefore it is often more useful if we are looking for future trends to look at the core index.”
Despite the uptick, the report was mild enough for investors, as U.S. stocks closed near a record high Aug. 12. The stock market appears, for now, to be focusing on the likelihood that the Federal Reserve will cut interest rates in September given concerns about a cooling labor market. Central bank officials, to Trump’s disapproval, have held rates steady in 2025 as they wait to see tariffs’ effect on the economy.
The July data comes amid a Bureau of Labor Statistics shakeup. After the agency’s downward revision of May and June employment data, Trump fired bureau Commissioner Erika McEntarfer, accusing her of political bias. Trump nominated E.J. Antoni, an economist at the conservative Heritage Foundation who has criticized the bureau, as the agency’s new commissioner.
The long and winding road of Trump’s tariffs
As the Trump administration highlights the collection of nearly $130 billion from the new tariffs so far, many economists expect that businesses will begin passing on the additional costs to U.S. customers.
Goldman Sachs estimated in an analysis shared with Bloomberg that U.S. companies have so far absorbed the bulk of tariff costs — around two-thirds of the levies — while consumers absorbed around 22% of the costs through June.
But Goldman Sachs said it expects the consumer share of the costs to soar to 67% by October if the tariffs follow previous patterns of how import levies affected prices.
Trump wrote in an Aug. 12 Truth Social post that Goldman Sachs CEO David Solomon should replace its economist. “It has been proven, that even at this late stage, Tariffs have not caused Inflation, or any other problems for America, other than massive amounts of CASH pouring into our Treasury’s coffers,” Trump wrote.
Some U.S. companies have avoided passing along higher prices by stockpiling goods ahead of the tariffs’ implementation. Others have absorbed costs to avoid losing customers or are holding off in hopes that courts nix the tariffs.
“That’s just businesses making business decisions,” said Holtz-Eakin, from the American Action Forum. “But there will be a point if the tariffs stay in place at the current levels where that just won’t be feasible anymore.”
Many studies of past tariffs have found that they harm the economy and raise consumer prices.
For now, however, experts agreed that the U.S. economy is in a wait-and-see moment.
Burtless, from Brookings, believes that the effects of tariffs on consumer prices are modest so far, and that price increases across different categories of goods and services appear “inconsistent with the idea that tariffs are the main driver of overall inflation.”
“That may turn out to be the case in the future,” he said, “but not yet.”
Holtz-Eakin also warned about putting too much stock in a single report.
“Never believe one month’s data,” he said. “That’s a rule of life if you’re doing policy work.”
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