Analysts worry that if the Fed cut rates to reduce government debt payments and then inflation reignited, bringing prices back under control again “might require a painful recession—which would lower nominal incomes and tax revenue, further aggravating the fiscal situation.”

The latest PPI report shows that tariffs have yet to result in higher prices for businesses and consumers.

U.S. factory activity contracted for a third straight month in May, and growth in overall U.S. private construction spending on manufacturing has flatlined from the boom seen under the Biden administration.