Price inflation is moving up again, in spite of President Trump’s repeated (and false) claims that prices are falling. The media isn’t right either, though, since much of the media consensus about June’s stubbornly high price inflation trend is that it was caused by tariffs. Tariffs however, are not inflationary. The price inflation we now see is the continued legacy of the monetary inflation of Trump-Biden efforts to embrace huge deficits and pressure the Federal Reserve to push interest rates downward with easy-money policies.

According to the latest price inflation data from the Bureau of Labor Statistics, the consumer price index rose 2.7 percent year over year, and 0.3 percent month over month. That’s the largest year-over-year increase in four months, and the largest month-to-month increase since January 2025. June’s CPI increase also places CPI growth above of CPI growth rates experienced during September of last year. At that time, Fed Chairman Jerome Powell had declared that price inflation was rapidly moving back toward the Fed’s two-percent target. Nine months later, we can see the Fed’s forecasters were clearly wrong, as the CPI has increased by 2.1 percent in that period. …

So, it is not accurate to say that tariffs cause inflation in any precise sense. We can only say that tariffs cause rising prices in some areas—assuming stable demand. Indeed we could argue that tariffs are deflationary in many cases because they raise the prices of important inputs for domestic production and thus force down labor demand and wages. Overall demand will then fall, and there will be deflation. This doesn’t mean tariffs improve the economic situation, of course. Tariffs are simply sales taxes on goods Americans wish to buy, and like all taxes, tariffs choke demand by leaving Americans will less disposable income.

If we wish to find the real cause of general price inflation, we need look no further than the monetary inflation that continues to be baked into the US economy. The US economy is still dogged by the more-than-five-trillion dollars that was created as a result of the Fed’s covid-era inflationist policies. This massive infusion of new money will continue to show up in unpredictable ways. …

Notably, the bond markets today have signaled that bond investors are not convinced that price inflation is “solved,” regardless of what the Trump administration might claim. Noting that price inflation is likely to persist into the foreseeable future, longer bond yields surged in the wake of the CPI inflation report’s release, with the 30-year yield surging to over five percent by midday on Tuesday. The ten-year yield—which is key in setting mortgage rates—responded to the CPI report by rising from 4.4 percent to 4.48 percent.