The ongoing back-and-forth over tariffs has caused concerns about costs of imported goods, passed onto U.S. consumers, spiking inflation. The latest Consumer Price Index (CPI) from the U.S. Bureau of Labor Statistics, one of the key measures of inflation, looks at inflation data as of May 2025 and was seen by some economists—including Bright MLS Chief Economist Lisa Sturtevant—as a way to measure the inflationary impact of tariffs thus far.
In May 2025, inflation ticked up to 2.4% year-over-year, and was up 0.1% monthly compared to April. This is slightly higher than the Federal Reserve’s stated goal of 2% annual inflation, but it is still relatively low; the 2.3% annual inflation in April was the lowest since February 2021, or in 50 months. Core inflation, which removes food and energy costs, came in at 2.8% above last year.
The highest monthly increases in inflation during May were food and shelter costs.
“So it’s unclear whether tariffs are having an impact on prices broadly across the economy at this point,” Sturtevant said in a press release.
Shelter costs (which are more than one-third of the index’s weight), grew 0.3% from April to May and were reported as the primary driver of inflation.
Lawrence Yun, chief economist of the National Association of REALTORS® (NAR), assessed that the current inflation rate will likely not lead to the Federal Reserve making another interest rate cut yet—and that shelter costs are a key reason why.
“If shelter inflation were to ease to 2% or even 3%, overall inflation would already be at a comfort point for the Federal Reserve. The Fed will remain on pause until inflation is fully contained at or below 2%,” said Yun. “(The Fed) has cited uncertainty regarding the tariff impact to monitor how prices play out in the coming months. Wall Street bettors are pointing to September as the first of several potential rate cuts.”
Sturtevant said that this inflation data, combined with the most recent jobs report showing slow but steady growth, “almost certainly means that the Fed will not cut interest rates at its meeting next week. A September cut is more likely if labor market conditions weaken, and if inflation stabilizes or comes down.”
Realtor.com® Senior Economist Jake Krimmel concurred in a press release that rates are unlikely to come down unless inflation falls further. For real estate specifically, Krimmel noted lower but still elevated mortgage rates are “keeping many would-be buyers on the sidelines during what is typically peak homebuying season.”
“Should inflation fears continue to ease and rates come down later this summer, sidelined buyers will re-enter a housing market that looks very different from recent years,” Krimmel explained, citing Realtor.com’s May data that inventory is reaching pre-pandemic levels, such as there being more than 1 million active listings nationwide for the first time since 2019.
“Homes are staying on the market longer, price growth has moderated, and buyers are regaining negotiating power—signs of a market that is gradually shifting back toward balance after years of tight supply and strong seller advantages,” added Krimmel.
Will homebuyers be reentering this new type of market? “Without a rate cut until the fall, it is likely that home sales transactions will remain low throughout the summer,” said Sturtevant. “If the Fed took the reasonable approach and excluded the shelter component of the CPI when evaluating consumer prices, they should have cut rates months ago. Unfortunately, the current process means that rates will remain higher for longer.”
For the full CPI, click here.
