Higher tariffs have begun to push up prices in some categories of goods. Estimates indicate total PCE prices rose 2.6% over the 12 months ending in July. Excluding food and energy, core PCE prices rose 2.9% year-over-year. Within core, goods prices increased 1.1% over the past 12 months, reversing a modest decline earlier in 2024. Housing services inflation is trending downward, while non-housing services inflation remains slightly above levels consistent with 2% inflation. Tariff effects are expected to accumulate in coming months with high uncertainty about timing and amounts, with a base case of a relatively short-lived, one-time price-level shift.
Turning to inflation, higher tariffs have begun to push up prices in some categories of goods. Estimates based on the latest available data indicate that total PCE prices rose 2.6% over the 12 months ending in July. Excluding the volatile food and energy categories, core PCE prices rose 2.9% above their level of a year ago. Within core, prices of goods increased 1.1% over the past 12 months a notable shift from the modest decline seen over the course of 2024.
The effects of tariffs on consumer prices are now clearly visible. We expect those effects to accumulate over coming months with high uncertainty about both timing and amounts. The question that matters for monetary policy is whether these price increases are likely to materially raise the risk of an ongoing inflation problem. A reasonable base case is that the effects will be relatively short-lived, a one-time shift in the price level.
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