Global Weekly Economic Update: Insights from Deloitte
Week of July 21, 2025
Deloitte Insights, through its Global Economics Research Center, continues to provide valuable analysis on economic developments worldwide. This week’s economic update—curated by Deloitte’s Chief Global Economist, Dr. Ira Kalish—highlights the recent trends in US inflation and monetary policy, Chinese economic performance, and the evolving landscape of global trade rules.
US Inflation Data Suggests Tariff-Driven Price Increases
Despite earlier expectations that recent tariffs imposed by the US government would sharply accelerate inflation, the impact was initially muted. This was largely due to a surge in imports ahead of tariff implementation, which allowed retailers to build inventories and maintain stable prices temporarily. However, June’s inflation data reveals a change in this trend, indicating rising consumer prices likely linked to tariffs.
The consumer price index (CPI) for June showed a 2.7% increase compared to a year ago, up from 2.4% in May. Core inflation, which excludes volatile food and energy prices, rose 2.9% on a year-over-year basis—the highest annual gain since February. Month-over-month, prices rose 0.3%, marking the largest monthly increase since January.
Durable goods prices, many of which include imported household products and appliances, showed significant increases as well. For example, June saw a 2.3% increase in appliance prices, a 4.2% rise in window and floor coverings, and a 4% jump in nonelectric cookware prices. These sharp price hikes reflect the impact of the high tariffs placed particularly on Chinese imports.
According to estimates from the Yale Budget Lab, the current US average tariff rate sits at 20.6%, the highest since 1910, a significant jump from the 3% at the start of this year. If tariff costs are fully passed on to consumers, inflation could rise approximately 2.1 percentage points above baseline levels, potentially pushing total inflation above 4% in the coming year. Furthermore, proposed tariffs expected to begin in August may further amplify this inflationary pressure.
Implications for US Monetary Policy and the Federal Reserve
The rising inflation trajectory complicates the outlook for US monetary policy. Market participants currently assign a 73% probability that the Federal Reserve will cut interest rates twice before the end of the year—once in October and again in December. However, the recent inflation data suggests the Fed might opt to pause rate adjustments temporarily to gauge the tariff impact on prices fully.
Investors appear to believe that inflation effects from tariffs could be transitory, and the Federal Reserve’s primary concern might shift toward the negative economic effects of tariffs, such as decreased household purchasing power due to rising prices without commensurate wage growth.
Notably, speculation surrounds the US administration’s potential efforts to influence Fed leadership. Reports have surfaced suggesting discussions about replacing Federal Reserve Chair Jerome Powell with someone more inclined toward cutting interest rates. President Trump publicly advocated for a dramatic 300 basis-point rate cut, which is widely considered unlikely. If the Fed were perceived as influenced by political considerations, this could lead to higher bond yields due to concerns over monetary policy independence.
Following the inflation report, the yield on the 10-year US Treasury bond increased by 60 basis points, the US dollar strengthened, and equity markets remained relatively stable, reflecting mixed investor reactions.
Overview of Other Global Economic Factors
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Chinese Economic Data: Trends indicate modest economic strength in China, reflecting resilience amid global uncertainties.
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Trade Rules: Ongoing developments in global trade regulations continue to shape economic policies and market responses worldwide.
About Ira Kalish
Dr. Ira Kalish, Deloitte Touche Tohmatsu’s Chief Global Economist, specializes in analyzing global economic, demographic, and social trends and their impacts on business strategy. With extensive international experience, Dr. Kalish frequently advises corporations and organizations worldwide and is regularly cited in prominent financial publications.
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