Morning Bid: Tariff inflation irks bonds

Mike Dolan

Wed, Jul 16, 2025, 6:12 AM 7 min read

By Mike Dolan

LONDON (Reuters) - What matters in U.S. and global markets today

By Mike Dolan, Editor-At-Large, Finance and Markets

U.S. long-bond rates have climbed back above 5% with the June consumer price report showing signs of tariff-related inflation, agitating global bond markets anew in an edgy week for government debt.

I'll get into this and the rest of today's market news below. Make sure to check out my column today, where I discuss how the dollar’s sharp decline may simply have replaced one bubble with another.

Today's Market Minute

* China's economy posted robust 5.2% growth in the second quarter, showing its export-heavy model has so far withstood U.S. tariffs. But beneath the headline resilience, cracks are widening.

* Britain's annual rate of consumer price inflation unexpectedly rose to its highest in over a year at 3.6% in June, official figures showed on Wednesday, potentially making it a tougher call for the Bank of England to cut interest rates next month.

* Rising prices in the U.S. across an array of goods from coffee to audio equipment to home furnishings pulled inflation higher in June in what economists see as evidence of the Trump administration's increasing import taxes passing through to consumers.

* U.S. President Donald Trump's threat to choke off Russia’s oil revenue via secondary sanctions would deal a hammer blow to Moscow's finances, but as ROI energy columnist Ron Bousso claims, markets are betting that the risk of higher energy prices will keep Washington from following through.

* The astonishing rebound in stocks since early April largely reflects investors' bet that U.S. President Donald Trump won't follow through on his tariff threats. But ROI columnist Jamie McGeever says that the market's very resilience may encourage the president to push forward, which could be bad news for equities in both the U.S. and Europe.

Tariff inflation irks bonds

As the headlines hit on Tuesday, the CPI report looked reasonably contained. Core inflation increased at a 2.9% annual rate in June, slightly below the 3% forecast even if a little faster than in May. Top-line inflation accelerated to a higher-than-expected 2.7% from 2.4% the previous month.

But rising prices across an array of goods, from coffee to audio equipment to home furnishings, were seen as worrying evidence that import tax hikes were indeed passing through to households - reinforcing Federal Reserve caution in cutting rates, not least with much wider tariff moves due next month.

The producer price report on Wednesday will hold that take up to the light again.