Washington, Aug 12 (AP) US inflation was unchanged last month while a measure of underlying inflation rose to its highest level in five months, as tariffs have raised the cost of some imported goods while gas and grocery prices cooled.

Consumer prices rose 2.7 per cent in July from a year earlier, the Labour Department said Tuesday, the same as the previous month and up from a post-pandemic low of 2.3 per cent in April. Excluding the volatile food and energy categories, core prices rose 3.1 per cent, up from 2.9 per cent in June.

The figures suggest that slowing cost growth for rents and cheaper gas are offsetting some of the impact of President Donald Trump's sweeping tariffs. Tuesday's figures likely reflect the 10 per cent universal tariff Trump imposed in April, as well as higher duties on countries such as China and Canada.

Still, stubbornly high inflation puts the Federal Reserve in a difficult spot: Hiring slowed sharply in the spring, after Trump announced tariffs in April. The stalling out of job gains has boosted financial market expectations for an interest rate cut by the central bank.

Yet Fed chair Jerome Powell has warned that worsening inflation could keep the Fed on the sidelines — a stance that has enraged Trump, who has defied traditional norms of central bank independence and demanded lower borrowing costs. (AP) RD RD

Tariff impact on inflation: core prices accelerated, complicating central bank policy and monetary-rate expectations amid cooling energy and food costs. Tariff measures imposed in April contributed to higher costs for some imported goods while headline inflation held steady and core inflation accelerated. Consumer prices were unchanged month-to-month with year-over-year CPI at 2.7% and core CPI rising to 3.1%, as energy and grocery prices cooled and rent growth slowed. The interaction of tariffs with these price components affects monetary policy by sustaining underlying inflation even amid softer labor market signals, complicating the central bank's rate decision framework.