WASHINGTON — U.S. inflation is expected to have increased in May, driven by the impact of President Donald Trump's tariffs. The upcoming inflation report, set to be released on Wednesday, is projected to show a rise in consumer prices by 2.5% compared to the same month last year. This marks the first increase in four months, up from 2.3% in April.

Economists surveyed by FactSet anticipate that core prices, which exclude food and energy, rose by 2.9% in May, up from 2.8% in April. The tariffs imposed by Trump are expected to contribute to this uptick by raising the costs of various imports, including clothing, furniture, and appliances. Many retailers have indicated plans to raise prices or have already done so to offset the costs associated with these import duties.

On a monthly basis, prices are expected to have increased by 0.2% from April to May, while core prices are forecasted to rise by 0.3%. At this rate, core prices would exceed the Federal Reserve's target of 2%. The Fed closely monitors core inflation as it often provides a clearer picture of future inflation trends.

Despite a cooling trend in inflation over the past year, economists believe that the tariffs will lead to higher prices in the latter half of 2025. Trump has implemented a 30% tariff on all imports from China, a 10% baseline tariff on goods from other countries, and a 50% tariff on steel and aluminum. The full effects of these tariffs may not be felt until later this year, as many companies had stockpiled goods before the tariffs took effect.

Bryan Eshelman, a managing director at AlixPartners, stated, "Higher prices are coming." He predicts that consumers will start feeling the impact in July, with back-to-school items like clothing and backpacks potentially increasing in price by 5% to 15%. Retailers may also begin adding surcharges at the register due to higher tariff costs starting in September.

Walmart's chief financial officer, John David Rainey, noted that a car seat currently priced at $350 could see an increase of $100. He also mentioned that Walmart plans to reduce inventory by up to 20% in anticipation of decreased demand due to rising prices.

The Federal Reserve has indicated it will maintain its key interest rate until it has a clearer understanding of how tariffs will affect the economy. Fed Chair Jerome Powell has emphasized a cautious approach, stating, "For now, it does seem like a fairly clear decision for us to wait and see."

As the inflation report approaches, the economic landscape remains uncertain, with many retailers already feeling the pressure to adjust prices in response to the tariffs.