Is Inflation About to Make a Comeback? Why the Second Half of 2025 Could Hit Your Wallet Harder Than You Think

The direction of U.S. inflation is becoming increasingly uncertain, and the second half of 2025 may turn out to be a crucial turning point. After President Donald Trump rolled out a fresh wave of tariffs earlier this year, many economists are warning that prices could start creeping up again—and this time, there may be no relief in sight.

The logic is simple: importers are now paying significantly more to bring goods into the country. Rather than absorbing the extra costs, many are quietly passing them down the supply chain—ultimately landing them in your shopping cart.

According to the Yale Budget Lab, the average tariff rate on imported goods reached 15.8% as of mid-June, the highest level since 1936. And while these cost increases haven't fully shown up in consumer price data just yet, that's likely to change as we head deeper into the year.

Diane Swonk, Chief Economist at KPMG, predicts core PCE (Personal Consumption Expenditures) inflation could rise to 4.3% by the fourth quarter—up significantly from the 2.5% rate seen earlier in the year, and well above the Federal Reserve's 2% target. Core PCE is considered a key measure of inflation as it excludes volatile food and energy prices and reflects longer-term trends.

Still, not everyone expects such a sharp spike. A survey by the Federal Reserve Bank of Philadelphia shows that many forecasters believe core PCE will peak around 3.4% in the third quarter before gradually easing.

Regardless of where inflation ultimately lands, one thing is clear: the financial pressure is building. Take Kevin Stone, for instance, a father of three living in the Chicago suburbs who also works as a purchasing manager at a mid-sized manufacturing firm. He’s already seeing double-digit price hikes on German machine parts, and his monthly gas bill has climbed from $180 to $220. “It feels like a constant game of catch-up,” Kevin says. “Your paycheck grows, but the prices grow faster.”

This is the exact scenario economists fear: stagflation, where prices rise even as economic growth slows. Unlike the post-pandemic inflation surge, this time there's no government stimulus, no emergency relief checks. Just higher prices and tighter budgets.

Torsten Slok, Chief Economist at Apollo, warns that this new round of inflation could stack on top of existing cost increases, making it even harder for households to adjust. If inflation proves persistent rather than temporary, the Fed could face a painful dilemma—raise interest rates and risk slowing growth further, or do nothing and risk letting inflation spiral.

And it’s not just economists who are feeling the squeeze. Lisa Baker, a mother of two in Portland, Oregon, had been planning to trade in her compact SUV for a larger one, better suited for weekend camping trips with the kids. But with car prices rising and interest rates now hovering around 7%, she’s decided to hit pause. “Back when rates were at 3%, it felt doable,” she says. “Now, it feels like I’d be signing up for a second rent.”

The bigger concern is whether this round of inflation will be a one-time bump—or the start of a new upward trend. If businesses and consumers start expecting prices to keep rising, that expectation alone can feed the cycle, driving prices even higher.

To be fair, some analysts still believe inflation is on a downward path overall, especially if businesses and consumers hold off on big spending. But the next few months will be telling. Tariffs, after all, were meant to reshape international trade—but they might end up reshaping your household budget instead.

For now, families like Kevin’s and Lisa’s are caught in the middle of an economic guessing game—trying to navigate a landscape where every trip to the store or gas station feels just a bit more expensive than the last. As 2025 moves into its second half, the question isn’t whether inflation will rise—but how much more we’ll all feel it.