Consumer prices posted their sharpest monthly decline in more than six years during June, offering Americans a brief reprieve from the year’s persistent inflation pressures.
The consumer price index fell a seasonally adjusted 0.4% for the month, pulling the annual inflation rate down to 3.5%, according to the Bureau of Labor Statistics.
Economists surveyed by Dow Jones had forecast a monthly decline of just 0.2% and an annual rate of 3.8%, following May’s 4.2% reading.
The monthly drop in headline inflation was the largest since April 2020, marking a notable shift after months of stubbornly elevated price readings.
Core inflation, which strips out food and energy, was flat on the month, bringing the 12-month rate down to 2.6%, well below the consensus forecast of 2.9%.
The energy index led the decline, slumping 5.7% in June, though energy costs remain 15.7% higher on an annual basis, with gasoline and fuel oil each falling more than 9%.
Services costs, a key metric closely watched by Federal Reserve policymakers for longer-run inflation signals, moderated significantly, with services excluding energy coming in flat for the month.
Shelter rose just 0.1%, transportation services fell 0.3%, food prices edged up 0.2%, and apparel prices dropped 0.6%, reflecting sensitivity to both energy and tariff-related inputs.
Stock market futures were mostly positive following the report, while Treasury yields fell sharply in response to the cooler-than-expected inflation data.
Despite the encouraging numbers, Federal Reserve officials are widely expected to hold rates steady at the July 28-29 meeting before approving a quarter-percentage-point hike in September.
Fed Governor Christopher Waller said Monday that it would take several months of positive readings to convince him that inflation is moving back toward the central bank’s 2% target.
Following their June meeting, policymakers released a statement declaring that the rate-setting Federal Open Market Committee “will deliver price stability,” signaling continued resolve on inflation.
New Fed Chairman Kevin Warsh, who took office in May, has placed inflation control at the center of his message while previously expressing a belief that rates could be lowered in the future.
“The Fed’s number one objective is to get monetary policy right — or as near to it as we possibly can,” Warsh said in remarks to Congress set for delivery Tuesday.
“That is our clear and constant aim, the star we steer by. And if we get policy right — and we will — the inflation surge of the last five years will be a thing of the past,” Warsh added.
The Fed currently targets its key overnight borrowing rate in a range between 3.5% and 3.75%, and markets are pricing in no change at the upcoming July meeting.
