Tarifflation Narrative Fail: Goods Prices Fall, Inflation Muted, Even as U.S. Collects Record Tariff Revenue

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Inflation held steady in July, with the Federal Reserve’s preferred price gauge showing a slight deceleration in cost pressures and defying predictions from Fed Chairman Jerome Powell that tariffs would push up consumer prices, government data released Friday showed.

The personal consumption expenditures price index rose 2.6 percent from a year earlier, matching economists’ forecasts and holding at the same annual pace as June. On a monthly basis, prices increased 0.2 percent, also in line with expectations and down from the previous month’s 0.3 percent increase.

If the July rate of inflation were to continue for the next twelve months, inflation would fall to 2.4 percent.

Core prices, which exclude volatile food and energy costs and are closely watched by Fed officials, rose 2.9 percent annually and 0.3 percent for the month — both figures meeting Wall Street predictions.

The relatively benign inflation reading offered reassurance to policymakers that price pressures remain manageable, even as services continued to be the primary driver of increases. Services prices climbed 3.6 percent from a year earlier, while goods prices increased 0.5 percent over the same period.

The monthly breakdown showed goods prices fell 0.1 percent in July, with energy costs dropping 1.1 percent and durable goods declining 0.1 percent. Over the past year, energy prices have fallen 2.7 percent while durable goods prices rose a modest 1.1 percent, and nondurable goods prices increased just 0.2 percent annually.

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