The latest US inflation rate, measured by the year-over-year change in the Consumer Price Index (CPI), stood at 2.7% for the 12 months ending in June 2025. This figure marks a modest increase from the 2.4% recorded in May but remains below the long-term historical average. Since 1913, when the Federal Reserve was established and consistent CPI data became available, the average annual inflation rate in the United States has been approximately 3.1%, reflecting periods of economic booms, recessions, and policy shifts that have shaped price dynamics over more than a century. The current rate’s position below this average suggests a relatively stable pricing environment, influenced by factors such as improved supply chains, moderated energy costs, and cautious consumer spending, which have helped keep inflationary pressures in check despite recent policy changes.

On April 2, 2025, dubbed “Liberation Day” by President Donald Trump, he announced sweeping new tariffs, including a baseline 10% levy on imports from all countries, with higher rates up to 25-34% on specific nations like China, Mexico, and the European Union, aimed at bolstering domestic manufacturing and addressing trade imbalances. In the immediate aftermath, prominent economists raised alarms about potential inflationary surges. For instance, analyses from the Yale Budget Lab projected that these tariffs could elevate the overall price level by 2.3% in the short term, equating to an average household cost increase of about $3,800 annually. Other experts, such as Gregory Daco from EY, forecasted an acceleration in consumer prices by at least 1 percentage point, while broader warnings from institutions like the Peterson Institute for International Economics highlighted risks of higher inflation coupled with slower growth. These predictions stemmed from concerns that tariffs would raise import costs, disrupt supply chains, and prompt retaliatory measures, potentially pushing inflation well above the Federal Reserve’s 2% target.

Despite these dire forecasts, the actual inflation trajectory has diverged significantly, remaining far below the anticipated spikes. By June 2025, just months after the tariffs took effect, the CPI increase was only 0.3% month-over-month, resulting in a 2.7% annual rate that, while slightly elevated due to some tariff-related price pressures in goods like automobiles and electronics, showed limited passthrough to consumers. Economists have noted that the impact has been muted so far, with little evidence of the widespread inflation surge predicted, as businesses absorbed some costs through efficiency gains and patriotic buying trends, rather than fully passing them on. This outcome, staying below both the historical average and the feared 4-5% levels from tariff-induced jumps, underscores the resilience of the US economy and suggests that initial economist projections may have overestimated the immediate inflationary effects amid offsetting factors like strong domestic production and global trade adaptations.