Inflation Research Brief

Tariff pass-through absent for now, but services remain sticky. May’s CPI report reflected a modest increase in prices. Headline inflation rose 0.1 percent month over month, bringing the annual rate to 2.4 percent. The data suggests price pressures from tariffs have yet to pass through to consumers; Core Goods CPI stayed flat in May and the year-over-year rate held at just 0.3 percent. Apparel and vehicle prices continued to decline slightly month over month, indicating prior inventory buildup has, for now, allowed businesses to absorb cost increases without raising prices. Meanwhile, services inflation remained the primary driver of headline CPI, rising 0.3 percent month over month and 3.6 percent year over year. Categories such as insurance and medical care are still posting modest increases, stressing the persistence of structural cost pressures.