TLDR
- Consumer prices fell 0.4% in June, the biggest monthly drop since April 2020
- Annual inflation eased to 3.5%, down from 4.2% in May
- Energy prices fell 5.7%, with gasoline down 9.7% for the month
- Core inflation (excluding food and energy) dropped to 2.6% annually
- The renewed Iran war could push inflation back up, economists warn
The latest U.S. inflation report came in better than expected. Consumer prices fell 0.4% in June on a monthly basis, bringing the annual inflation rate down to 3.5%, according to data released Tuesday by the Bureau of Labor Statistics.
BREAKING: June CPI inflation falls to 3.5%, below expectations of 3.8%
Core CPI inflation falls to 2.6%, below expectations of 2.8%.
Month-over-month CPI inflation fell -0.4%, the biggest monthly drop since May 2020.
US stock market futures are surging on the news.
— The Kobeissi Letter (@KobeissiLetter) July 14, 2026
That monthly drop is the largest single-month decline since April 2020, when prices fell 0.8% during the early days of the pandemic.
Economists had expected a much smaller pullback. The consensus forecast was for a 0.1% monthly decline and a 3.8% to 3.9% annual rate.
The June figure is a notable step down from May, when inflation rose 0.5% month over month and 4.2% year over year — the fastest pace in more than three years.
Energy Prices Led the Drop
The main driver of June’s cooling was cheaper energy. The energy index fell 5.7% for the month, while gasoline prices dropped 9.7%.
A temporary ceasefire in the war with Iran had helped bring gas prices down heading into June. That ceasefire has since collapsed, which could reverse some of the relief seen at the pump.
Both energy and gasoline prices remain higher than they were a year ago, despite the monthly decline.
Food prices edged up 0.2% in June. Lettuce and fish prices were among the categories that pushed food costs higher.
Airfares jumped 27% over the past year, while clothing prices unexpectedly fell. Auto insurance posted a second straight monthly decline. Shelter inflation saw its smallest monthly gain since early 2021.
Core Inflation Also Eased
Stripping out food and energy, core inflation came in at 2.6% annually in June, down from 2.9% in May. On a monthly basis, core prices were flat.
Economists had expected core inflation to rise 0.2% month over month and 2.8% year over year. The actual reading came in below both forecasts.
The CPI report landed on the same day Federal Reserve Chairman Kevin Warsh was set to face lawmakers on Capitol Hill for the first time. Inflation was expected to be a key topic of questioning.
The data also arrived alongside earnings reports from JPMorgan, Bank of America, and other major banks. Those results pointed to continued strength in the broader economy.
Heather Long, chief economist at Navy Federal Credit Union, said the renewed Iran conflict will “almost certainly push inflation back up,” but added the June data gives the Federal Reserve time to watch and wait before making any policy moves.
The next CPI report will show whether the renewed conflict in Iran begins to push energy and overall prices higher again.
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