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Investing.com - Inflation risks in the United States are still being underestimated, even after data this week seemed to show that U.S. consumer price gains accelerated in June in the wake of rising tariffs, according to analysts from Deutsche Bank (ETR:DBKGn).
U.S. consumer prices grew at a faster annualized pace in June, suggesting that the impact of President Donald Trump’s aggressive tariff policies could be starting to emerge.
The Labor Department’s headline consumer price index came in at 2.7% in the twelve months to June, compared with expectations of 2.6% and May’s reading of 2.4%.
Month-on-month, the figure was 0.3%, up from 0.1% in May and in line with projections.
Excluding more volatile items like food and fuel, so-called "core" CPI also accelerated slightly to 2.9% year-on-year and 0.2% on a monthly basis. Yet both readings were below estimates of 3.0% and 0.3%, respectively.
The benchmark S&P 500 and blue-chip Dow Jones Industrial Average both fell on Tuesday following the data, erasing some early gains, as analysts noted an particular uptick in the prices of goods like apparel and toys that more exposed to the tariffs.
"Despite initial relief, a focus on the components like core goods led to growing alarm about the tariff impact, which prompted a spike in Treasury yields across the curve," the Deutsche Bank analysts said.
Yet in a note to clients, the brokerage argued that there is a "remarkable complacency among key assets" despite several factors now coalescing at a global level to continue pushing up prices.
Along with an ongoing baseline 10% tariff and duties on items like steel and aluminum, the analysts highlighted the "looming prospect" of more tariffs in the coming weeks. Trump’s elevated "reciprocal" levies on a host of countries are due to take effect on August 1, while the president has said his heightened duties on pharmaceutical imports into the U.S. will likely be unveiled by the end of the month.
"Markets simply aren’t pricing in" the effect of these duties yet, they argued.