Inflation should rise in the coming months as more tariff effects materialize, but likely by less than first expected if new trade deals happen.

The risk is that a hotter-than-expected June inflation report — one that Fed Chair Jerome Powell recently called among the most important for assessing the impact of tariffs — could slow the pace at which the central bank lowers interest rates. Importantly, that could also throw a wrench into the stock market’s record-setting rally.

The latest federal data show the CPI increasing 2.7% over the previous 12 months, outpacing the 2.4% May figure and raising questions around the impact of trade uncertainty.