What To Expect In Wednesday’s Report On Inflation

Inflation likely rose in May after three months of declines, as President Donald Trump’s tariffs start to push up prices.

The Bureau of Labor Statistics is scheduled to release the Consumer Price Index report on Wednesday. According to a survey of economists by Dow Jones Newswires and The Wall Street Journal, it’s likely to show that the key cost-of-living measure rose 2.4% over the last year, up from a 2.3% annual increase in April. “Core” inflation, which excludes volatile prices for food and energy, is expected to rise 2.9% over the year, up from 2.8% in April.

The report could mark a turning point in the economy’s trajectory and be an early indicator in the “hard data” of the effects of the wide-ranging tariffs Trump imposed over the last few months. So far, “soft data” such as surveys have indicated businesses are raising prices and slowing down hiring because of the tariffs, but “hard data” such as official measures of inflation and job growth have been business-as-usual.

“I expect the May CPI report to begin reflecting upward pressure on goods prices due to tariffs,” Ronald Temple, chief market strategist at Lazard, wrote in a commentary. “While companies are carefully avoiding attracting attention by announcing price increases or highlighting that they are a result of tariffs, they have to choose between raising prices to protect margins, cutting other costs to offset tariffs, or suffering lower margins and a weaker share price.”

The Number To Watch

One statistic included in the report will be especially useful for gauging the impact of tariffs.

A figure economists call “core goods” in the index measures prices of everything besides services, food, and energy. The Bureau of Labor Statistics calls the number “commodities less food and energy.” These prices will be the ones hit hardest by the tariffs, economists said.

Until this point, core goods had been a bright spot for household budgets, showing declines in prices every month from January 2024 through March 2025. But in April, the core goods index rose 0.1%, and forecasters expect that to go higher in May.

“We expect a modest push from tariffs with firmer new cars, apparel, and other heavily tariffed goods such as household appliances,” Michael T. Gapen, chief U.S. economist at Morgan Stanley, wrote in a commentary.

The View From The Fed

The report could have implications for the nation’s monetary policy. Officials at the Federal Reserve closely watch inflation reports to see if prices are rising too fast: the Fed aims to keep inflation running at an annual rate of 2%. However, central bankers use the core measurement in the Personal Consumption Expenditures price index, not CPI, as their benchmark.

Still, a rebound in CPI inflation could pressure the Fed to keep its benchmark interest rate higher for longer. Fed officials have held the influential fed funds rate flat, at a higher-than-usual level, this year out of concern that tariffs could push up prices and reignite inflation.

“I do not expect the Fed to raise rates in response to tariff-induced inflation, but I also do not anticipate any rate cuts against a backdrop where core inflation is likely to rise to levels around 4%,” Temple wrote.