The US core CPI is lower than expected, which may exacerbate the divergence between the Federal Reserve's interest rate cuts

The US core consumer price index rose less than expected for the fifth straight month on the back of falling car prices. Specific data showed strong price performance in categories that are more affected by tariffs, such as toys, furniture, appliances and clothing, indicating that companies have started to pass on higher import costs to consumers. At the same time, new and used car prices fell. The lower-than-expected core consumer price index has raised questions about the extent to which the tariffs introduced by Trump will affect consumer prices. Some companies have protected consumers by stockpiling ahead of the levies or absorbing some of the extra costs at the expense of lower profit margins. The lower-than-expected data is likely to strengthen Mr. Trump's call for the Federal Reserve to cut interest rates. Although some officials have expressed a willingness to cut interest rates at their meeting in two weeks, policymakers remain divided over whether the tariffs will cause a one-off price shock or a more lasting impact, and are likely to leave rates unchanged again.