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Graphic Truth: What’s behind the US inflation numbers?
US prices rose 2.7% over the 12 months until July 2025, a relatively steady rate despite the onset of President Donald Trump’s tariffs. But what’s behind this inflation figure? This Graphic Truth explores how the prices of various categories of consumer goods are changing.
An oil tanker is being loaded at Saudi Aramco's Ras Tanura oil refinery and oil terminal in Saudi Arabia May 21, 2018.
Hard Numbers: OPEC+ further expands oil output, Ukraine attacks drone corruption, UK releases gonorrhoea vaccine, & More
547,000: OPEC Plus, the eight-member oil cartel de facto led by Saudi Arabia, announced on Sunday it would increase oil production by 547,000 barrels a day, the latest in a series of increases that first started in April. In response, oil prices dropped more than 2% on Monday.
6: Anti-corruption authorities in Ukraine charged six people with embezzling funds intended for drone purchases in a “large-scale” bribery scheme. The arrests include one sitting legislator, a National Guard commander, two officials, and two businessmen.
100,000: The United Kingdom rolled out its gonorrhoea vaccines on Sunday, a move that the National Health Service believes will prevent 100,000 cases of the sexually transmitted infection. The vaccine is 30-40% effective, but the hope is that it will stem the growing number of antibiotic-resistant cases of the infection.
12: Former Colombian President Álvaro Uribe was sentenced to 12 years under house arrest on Friday for witness tampering and fraud. He was also barred from public office and fined $578,000, but the right-wing ex-leader plans to appeal the conviction.
0000: Iran’s parliament proposed cutting four zeros from is currency, the rial, as decades of high inflation, sanctions and economic mismanagement have eroded its value. The proposed change would aim to simplify financial accounting and reduce printing costs.U.S. President Donald Trump speaks next to Federal Reserve Chair Jerome Powell during a tour of the Federal Reserve Board building, which is currently undergoing renovations, in Washington, D.C., U.S., July 24, 2025.
Why is Trump threatening the Fed, and why does it matter?
On Thursday afternoon, just before golden hour, President Donald Trump threw a white hardhat over his flaxen coif and strode into the Federal Reserve building on Constitution Avenue.
The stated purpose of his visit to the world’s most influential central bank was almost comically mundane: he was there to inspect a building renovation project for cost overruns. Trump is, as he likes to remind people, a “builder,” so he knows an overpriced crown molding when he sees one. He says the $2.5-billion project, funded by Congress, is already more than $500 million over budget. The Fed disputes this number.
Sure enough, after a walking tour of the sites with Fed Chairman Jerome Powell, the two men sparred about the costs of the buildings that are currently being rebuilt by the Fed – and at least one that is not being built because, as Powell gamely pointed out, it was already built five years ago.
But the hardhat haggling was pantomime for a more serious dispute.
For weeks now, Trump has been insulting and pressuring the “numbskull” Powell to lower interest rates, in hopes that doing so will give the US economy, “the hottest in the world,” a boost. The midterms are, after all, approaching.
But Powell isn’t budging. He argues that with Trump’s tariff threats still nudging up prices, lower rates could set inflation soaring all over again. The Fed’s legally-mandated job is to keep inflation low and growth humming – without presidential meddling.
More alarmingly, Trump has recently pondered removing Powell – whom he nominated as Fed chair eight years ago – before his term ends next spring. Doing so would be an unprecedented assault on the Fed’s independence. Under the law, a president can sack a Fed chair only for serious violations of the law or ethics.
Disagreements over interest rate policy are not that. But an allegedly botched building renovation that has cost taxpayers hundreds of millions of dollars in cost overruns? Maybe it’s malfeasance enough. And while Trump said yesterday that firing Powell because of cost overruns would be a “a big move” that is “not necessary” right now, the visit sends a clear message: this is an issue that can be brought up again if Powell doesn’t, as Trump insists, “do the right thing.”
So what is “Fed independence”? And why is it a problem if it suffers?
To learn more I rang up one of the smartest global economy analysts out there – Rob Kahn, Managing Director of Global Macro at Eurasia Group. Our exchange has been edited for clarity and concision. Here goes.
Rob, why is central bank independence so important, and to whom?
When a central bank is subservient to the government, it will often make decisions to keep interest rates too low. And as a result you get too much money printed up and then more inflation.
There is a vast body of evidence that says that economies that have independent central banks do better. They tend to have lower inflation and higher growth. When everyone – financial markets, firms, households – can make longer-term investment and spending decisions based on stable accurate expectations about what the future will hold, they make better decisions and they have better outcomes.
Economies just perform better when individuals have reasonably stable expectations about what inflation's going to be this year, next year, five years from now.
If Trump forces Powell to cut rates, or replaces him with someone who does that, what might happen?
The first thing to remind people of is that the Fed doesn’t actually control all the interest rates in the economy. They control the so-called “federal funds rate,” which is the rate at which banks lend to each other. By doing that, they can influence all the other interest rates in the economy, but they don’t control them directly.
If the Fed were perceived to be cutting rates under pressure from Donald Trump, you might see that even though the Fed funds rate went down, other lenders would say, “Wow, in the longer term we’re going to have higher inflation, so we’re going to actually need higher interest rates ahead of that.” So even though the Fed rate goes down, the market rates for a lot of people could actually go up.
Why is Trump’s hardhat visit so alarming for people worried about Fed independence?
Well, if they can fire the Fed chair for overspending on a building project, then you know that any time a president has a disagreement with the Fed chair in the future, he can just come up with something and say, “oh, this is the real cause,” and fire him for that.
And that will effectively undermine the Fed’s independence. So Trump in a hard hat is really not about a renovation. This is really about whether the Fed can be independent in setting monetary policy. Don’t be fooled.
Graphic Truth: Japan’s ruling coalition loses majority
Japan’s ruling coalition lost control of the upper house in Sunday’s election, further weakening Prime Minister Shigeru Ishiba amid growing domestic pressure and international challenges. To retain its majority, the Liberal Democratic Party and its partner Komeito needed to win 50 seats – they got only 47. This follows the LDP’s worst electoral showing in 15 years in last fall’s Lower House election. Rising inflation and opposition calls for tax cuts resonated with voters, while the far-right Sanseito party gained ground with a nationalist, anti-immigration platform. Despite the setback, Ishiba vowed to stay on, stressing the importance of upcoming US trade talks as Japan faces an August tariff deadline. For a refresher on why Shigeru was in such trouble to begin with, see here.
June 2025 inflation rate.
Graphic Truth: Inflation accelerates in June
Inflation ticked up to 2.7% in June as the effects of tariffs took hold, potentially complicating Donald Trump’s economic playbook. Consumer prices rose 0.3% since May, fueled by higher gas and apparel costs. Core inflation – which is seen as more reliable because it discounts volatile food and energy prices – also edged up to 2.9% year-over-year. With new tariffs looming Aug. 1, policymakers are bracing for more turbulence.
US President Donald Trump speaks to reporters aboard Air Force One after departing early from the the G7 summit in Canada to return to Washington, D.C., on June 17, 2025.
Why hasn’t US inflation boomed?
When US President Donald Trump announced a swath of tariffs on virtually every US trading partner on April 2 – which he dubbed “Liberation Day” – most economists had the same warning: prices will rise. What’s more, Trump’s plan to deport millions of undocumented migrants and his adviser’s idea to weaken the US dollar would add to the buoyant pressure on prices.
Exactly three months on, those inflation distress calls appear to have been misplaced: the inflation rate was 2.4% in May, within touching distance of the Federal Reserve’s 2% target, and far below the rates seen in 2022 under former President Joe Biden – even with the dollar having its worst start to a year in over 50 years.
So why haven’t prices skyrocketed, as some economists warned?
First of all, not all the tariffs have even been imposed. When US treasury markets began to suffer following the announcement of “retaliatory tariffs,” Trump pulled back, pausing these extra taxes until July 9. What’s left of his new tariff policies are a 10% across-the-board levy – even these were briefly invalidated – a 55% rate on Chinese imports (down from 145%), and sectoral duties on goods like steel, aluminum, and auto parts. The US president has also allowed for a smattering of exemptions, most notably on smartphones and computers – those must have been a rotten Apple.
Secondly, businesses have made choices that have put a cap on price hikes.
Part of this is simply due to firms waiting for Trump to finalize his tariffs plans before they start passing on the higher costs to consumers, per University of Missouri economics professor Joseph Haslag.
“During the heyday of the negotiations, I don’t think anyone wanted to start raising prices until they knew what the final deal was going to look like,” he said.
Some of it is also thanks to forward planning. When Trump initially announced the tariffs, some firms stocked up on inputs before the duties came into effect. This has allowed them to hold prices as they continue to sell inventory that was purchased at pre-Liberation Day prices.
Finally, there are some economic factors that are putting downward pressure on prices, per Haslag. The economy is slowing, reducing demand and lowering inflation rates. What’s more, artificial intelligence may have already started helping firms to lower prices: it boosts worker and business productivity, allowing them to produce more in less time and at less cost.
Trump feels validated. The president will see the misguided warnings of high inflation as the latest example of the media and the “deep state” trying, and failing, to take him down – he lauded the low inflation rates during a May speech in Saudi Arabia. As such, he will feel that he has the green light to continue advancing other elements of his agenda, safe in the belief that any cautions from the “establishment” can be shot down as “fake news.”
Aren’t those “reciprocal tariffs” coming back though? Affirmative – they return just one week from now, and Trump’s plans are still up in the air. He has only negotiated one trade deal – with the United Kingdom – despite saying soon after “Liberation Day” that he had made 200. Treasury Secretary Scott Bessent hinted that there might be some flexibility on the timing, which would be in line with the president’s past actions.
“July 9 is not a drop-dead date on which tariffs are going to be implemented across the board,” said Haslag. “We’ve had other sorts of deadlines that have come and passed over the past few months with regards to tariffs.”
The chickens always come home to roost. For any political gains Trump may have made thanks to lower-than-expected inflation rates, this upcoming deadline for the reciprocals creates a major dilemma for Trump: either he “chickens out” again, as one columnist jokingly suggested, or he actually imposes these hefty duties. The Fourth of July celebrations this weekend may not be as expensive as once feared – will Americans be able to say the same for Labor Day, Thanksgiving, or even Christmas?The Graphic Truth: What’s behind American inflation?
US inflation rates have finally started to relax over the past 12 months: Prices rose at an annual rate of 2.3% in April, within touching distance of the Federal Reserve’s 2% target. This chart shows what product categories fed the inflation surge in 2022 — and its subsequent slowdown.
The recent drop in inflation rates is in large part thanks to plateauing transport costs, which spiked in 2021 and 2022 amid global supply-chain issues and Russia’s invasion of Ukraine. However, housing costs have continued to rise at a fairly steady pace, a symptom of the current US property crunch.
People bathe in the sun under parasols on a beach near the city of Larnaca, Cyprus, on August 11, 2024.
HARD NUMBERS: UAE carries Cyprus’ water, China toughens trade stance, Trump admin ignores court order, Americans expect price hikes, Germany’s economy remains stagnant, South Korea’s ex-leader indicted
15,000: The United Arab Emirates is literally helping Cyprus navigate troubled waters by providing portable desalination plants to the Mediterranean island free of charge so it can supply enough water to the deluge of tourists set to visit this summer. The Emirati nation’s plants will reportedly produce 15,000 cubic meters of potable water per day. It’s unclear if the UAE is receiving anything in return – it seems happy to go with the flow.
$582 billion: China informed the United States that it must “completely cancel all unilateral tariff measures” if it hopes to begin talks over trade. Beijing had previously said that it was open to talks, without preconditions. However, on Friday, Reuters reported that Beijing would exempt some critical goods from its 125% and is asking its firms to identify imports they need to continue functioning --- though it stopped short of publicly making the first move in trade war de-escalation. Total trade between the two superpowers was $582 billion in 2024, but the sweeping new tariffs that each has slapped on the other is likely to force this number down.
2: In the latest clash between the Trump administration and the courts on immigration, the White House moved a Venezuelan man from Pennsylvania to Texas — possibly preparing to deport him — right after a judge ruled that the government couldn’t remove him from the commonwealth or the United States. The man, who wasn’t formally named, had been employed as a construction worker in Philadelphia for two months before his arrest in February on suspicion of being part of Venezuela’s Tren de Aragua gang.
77%: The price isn’t right: 77% of Americans expect President Donald Trump’s tariff plan to raise consumer prices, with 47% believing that consumer prices will “increase a lot,” according to an AP-NORC poll. Despite those numbers, 4 in 10 Americans still approve of Trump’s handling of the economy and trade negotiations.
0: In the wake of Trump’s tariffs, Germany announced on Thursday it was downgrading its predicted economic growth rate — the economy depends heavily on manufacturing exports — from 0.3% to 0.0%. If the prediction holds, 2025 will be the third straight year of stagnation for Europe’s largest economy.
217 million: Former South Korean President Moon Jae-in was indicted on Thursday on bribery charges, alleging that he received 217 million won ($151,705) from the founder of a low-cost airline. No, it wasn’t Turkish Airlines but Eastar Jet.