The Bureau of Labor Statistics reported that the consumer price index (CPI), a popular inflation gauge, increased in June to 2.7% on an annual basis as prices rose for consumers.

Low rates can also inflate financial markets. Investors, unable to generate strong returns in safe assets, such as short-term Treasury notes, will move into progressively higher-risk assets, where returns are higher, but so is the danger of steep losses.

The inflation gauge the Federal Reserve relies on most to decide whether to raise or lower U.S. interest rates is likely to cement a decision by the central bank to stand pat at its next meeting at the end of July.

With June's inflation reading coming in hotter than the month prior, the Fed is under renewed pressure to maintain its current target range for the federal funds rate. Analysts now see little chance of a rate cut in the near term. That means HELOC borrowers are unlikely to see significant rate drops anytime soon.

What is clear is that the current 4.33% median Fed funds target rate remains well above the inflation trend. Even after the acceleration in consumer prices in June, the policy rate is roughly 1.4 percentage points above headline CPI’s one-year change – close to the biggest gap post-pandemic.

Some investors had clung to a bit of hope that the Federal Reserve would cut interest rates at its next meeting on July 30. Tuesday's report on inflation brought the chances of that down even further.

If you're thinking about tapping your home's equity, make sure you understand what could happen with rates soon.

The report on wholesale inflation came a day after the Labor Department reported that consumer prices last month rose 2.7% from June 2024, the biggest year-over-year gain since February, as Trump’s sweeping tariffs pushed up the cost of everything from groceries to appliances.