Import prices climb 0.3% in June, keeping Fed on inflation watch

Import costs rose for a second month in June, complicating the Federal Reserve's inflation fight even as consumer prices showed unexpected relief.

Import prices rose 0.3% in June, the Bureau of Labor Statistics reported Thursday, extending a run of elevated readings that keeps pressure on the Federal Reserve even as consumer inflation showed signs of cooling.

"Import prices rising at this pace means the disinflation we saw in June's CPI may be short-lived," said Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management. "The Fed cannot afford to look through this."

The increase followed a downwardly revised 1.7% gain in May and contrasted with the consumer price index, which fell 0.4% in June — the largest monthly drop since April 2020 — as gasoline prices tumbled 9.7% after a temporary US-Iran truce. Core CPI was flat on the month, pushing the annual rate to 2.6% from 2.8%, below the 2.9% consensus forecast.

The divergence between falling consumer prices and rising import costs creates a dilemma for Fed officials. While the June CPI report cut the market-implied probability of a July rate hike to 13% from 42%, the rebound in import costs — combined with the collapse of the Iran peace deal and resurgent oil prices — threatens to reverse the disinflation progress. Markets still price at least one quarter-point hike by year-end, according to CME FedWatch data.

The import price data captures costs earlier in the supply chain, meaning June's increase could feed through to consumer prices in coming months. Industrial supplies and materials, a volatile category that often drives the headline number, accounted for much of the gain.

Average US gasoline prices fell to $4.18 a gallon in June from $4.61 in May, according to the Energy Information Administration, as the now-collapsed US-Iran truce allowed oil tankers to transit the Strait of Hormuz. Brent crude has since rebounded, and AMP chief economist Shane Oliver estimates oil could reach $150 a barrel if the Strait remains closed.

The last time import prices rose at a comparable pace was in the first quarter of 2025, when tariffs imposed under the Trump administration pushed up costs for industrial inputs. That episode preceded a 25-basis-point rate hike in May 2025, and the S&P 500 fell 3.2% in the month following the increase.

The US dollar strengthened against major currencies following the import price report, while Treasury yields edged higher as traders recalibrated rate expectations.

This article is for informational purposes only and does not constitute investment advice.