Core Inflation Test Ahead: Has the Tariff Fuse Been Lit?

Investors are eyeing Tuesday's CPI report to see if April's tariffs left their mark on prices. Economists expect core inflation to tick up more than last month and to show a three percent gain year over year.

When a ten percent duty hit a range of imports in April and whispers of even higher levies circulated, businesses ran down old stockpiles. That has delayed sticker shock but means the real impact could land later this summer.

Consensus forecasts call for core CPI to rise three tenths of one percent from May and headline inflation to match that pace once volatile food and energy are stripped out.

The Federal Reserve has been reluctant to ease policy while inflation stays above its two percent goal. A hotter CPI print could keep rate cuts off the table and unsettle markets that crave clarity.

With trade tensions, fading inventory buffers and services prices moving in opposite directions, this report will set the stage for the next few months. All eyes will be on how big that tariff bump really is.