U.S. inflation slowed in June as lower gasoline prices helped reduce overall consumer costs, according to the latest Consumer Price Index (CPI) released by the Labor Department.
Consumer prices fell 0.4% from May to June, the largest monthly decline in four years, following a 0.5% increase the previous month. On an annual basis, inflation eased to 3.5%, down from 4.2% in May and below economists’ expectations.
Core inflation, which excludes the more volatile food and energy categories, was unchanged from May and rose 2.6% over the past year, down from 2.9% in May. Economists view core inflation as a key measure of underlying price trends because it is less affected by short-term swings in fuel and food costs.
The decline in inflation was driven largely by a sharp drop in gasoline prices, which fell nearly 10% during June as energy markets stabilized during a temporary ceasefire involving Iran. Electricity prices also declined during the month, while clothing prices decreased modestly.
Some categories continued to see higher prices. Food, shelter, and other household expenses increased, although many of those gains were smaller than expected. Airfare and several other transportation-related costs also remained elevated.
Economists cautioned that June’s improvement may not continue. Renewed fighting involving Iran has already pushed oil prices higher, raising the possibility that gasoline prices could increase again in the coming months and put upward pressure on inflation.
The latest report reduces some immediate pressure on the Federal Reserve as it weighs future interest rate decisions. However, inflation remains above the Fed’s long-term 2% target, and policymakers are expected to continue monitoring energy markets and future inflation data before making any changes to monetary policy.
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