The report showed goods prices, excluding food and energy commodities, were unchanged, suggesting higher costs from tariffs are yet to be passed on to consumers. New and used-car prices both declined, as did apparel.
Meanwhile, services prices minus energy rose 0.2%, a deceleration from the prior month.
Treasuries rallied, the dollar declined and S&P 500 futures advanced after the report. Interest-rate swaps showed traders see a 75% probability that the Federal Reserve will cut borrowing costs by September.
The string of below-forecast inflation readings add to evidence that consumers have yet to feel the pinch of President Donald Trump’s tariffs — perhaps because the most punitive levies have temporarily been on pause, or thanks to companies so far absorbing the extra costs.
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However, if higher tariffs set in, shielding consumers from those costs will become more difficult, which is partly why economists expect firms to raise prices more meaningfully in the coming months.
