US inflation set to tick higher as Trump tariffs hit consumers

The latest readings suggest that President Donald Trump’s higher import duties, part of his ongoing trade crackdowns are starting to work their way into consumer prices. Bloomberg notes that a separate measure of core services inflation remains tame for now, but economists expect gradual increases in the coming months. For the Federal Reserve, this creates a policy challenge. Officials have kept interest rates unchanged in 2025, seeking clarity on whether tariffs will cause sustained inflation. But they must also weigh signs of a cooling labour market, the other half of their dual mandate.

Consumers still spending, for now

Retail sales data due Friday is expected to show a solid July increase, boosted by incentives on vehicle purchases and online shopping spikes during Amazon’s Prime Day. However, Bloomberg reports that once adjusted for inflation, the figures may point to a more lacklustre consumer spending environment. Manufacturing data from the Fed is likely to show stagnant factory output as producers navigate shifting tariff rules. Meanwhile, a preliminary US–China trade truce is set to expire on Tuesday, although an extension remains possible.

Global markets eye central bank's move

Beyond the US, Bloomberg notes that the Bank of Canada will publish minutes from its decision to hold rates at 2.75 per cent for a third meeting, while leaving the door open for cuts if inflation remains contained. July home sales data will also indicate whether recent gains have continued. Asia’s economic calendar is packed, with China releasing July activity data, including industrial production, retail sales, and jobless figures on Friday. Australia’s central bank is expected to cut rates for a third time this year, while India’s CPI and wholesale price data will offer fresh insight into price trends before Trump’s 50 per cent tariff on Indian goods fully kicks in.

In Europe, the UK will release wage growth and GDP figures in the wake of the Bank of England’s latest rate cut, while Switzerland’s economy may show a sudden contraction even before Trump’s 39 per cent tariff impact takes hold. Africa and Latin America will also see rate decisions and inflation reports, with Brazil, Argentina, and Chile updating price data, and Kenya, Uganda, and Namibia adjusting policy to manage growth and price stability.

The coming week’s data, as per Bloomberg, will help clarify whether the US inflation uptick is temporary or the start of a broader trend. If tariffs continue to feed through to consumer prices, the Fed may face mounting pressure to act, even as global markets adjust to a wave of central bank decisions and shifting trade policies.

(With input from the agencies)