WASHINGTON, D.C. / RankWire.AI / – In June, U.S. consumer prices saw a decrease of 0.4 percent, leading to a slowdown in the annual inflation rate to 3.5 percent. The U.S. Bureau of Labor Statistics reported that the Consumer Price Index (CPI) followed a 0.5 percent rise in May. This monthly decline marked the most significant drop since April 2020. The yearly inflation rate also declined from 4.2 percent in May. The report covers costs paid by urban consumers across key expenditure categories.
The monthly decrease was driven by falling energy prices, which dropped 5.7 percent after a 3.9 percent increase in May. Gasoline prices declined 9.7 percent, electricity costs fell 1.0 percent, and utility gas prices increased 0.5 percent. Fuel oil prices also dropped 9.2 percent during the month. Despite these declines, energy expenses remained 15.7 percent higher than the same period last year. Gasoline was up 26.7 percent annually, electricity rose 4.0 percent, and utility gas increased 3.0 percent.
Core consumer prices, which exclude food and energy, remained unchanged in June after a 0.2 percent rise in May. The core inflation increased 2.6 percent from the previous year, down from 2.9 percent in May. Shelter costs grew by 0.1 percent, marking the smallest monthly increase since January 2021. Rent increased 0.1 percent, while owners’ equivalent rent was up 0.2 percent. Expenses for lodging away from home fell 2.3 percent. Services excluding energy were flat, though they increased 3.2 percent annually.
Energy prices lead the decline in June
Food prices edged up 0.2 percent for the second consecutive month, remaining 3.0 percent higher than June 2025. Grocery and restaurant prices each increased by 0.2 percent during the month. Food-at-home costs advanced 2.7 percent over the year, while food away from home rose 3.4 percent. Egg prices climbed 4.3 percent in June, dairy prices increased 1.2 percent, coffee prices fell 2.0 percent, and fruit and vegetable prices decreased 0.2 percent. Full-service meal prices rose 0.4 percent.
Other household expenses also declined. Motor vehicle insurance fell 2.0 percent, communication costs dropped 1.5 percent, and apparel costs decreased 0.6 percent. Used car and truck prices dipped 0.2 percent, and medical care costs fell 0.1 percent. Hospital service prices increased 0.1 percent despite the overall decline in medical costs. Recreation prices rose 0.5 percent, household furnishings and personal care each increased 0.2 percent, and new vehicle prices remained steady after falling in May.
Federal Reserve maintains current interest rate
The June inflation report provides policymakers with an updated reading ahead of their upcoming rate decision. The Federal Reserve has kept its benchmark interest rate between 3.50 percent and 3.75 percent. In June, officials unanimously agreed to maintain this range. The next policy meeting is scheduled from July 28 through July 29. The Fed’s inflation target remains 2 percent, which is below the latest 3.5 percent annual CPI figure. Inflation is also lower than the 4.2 percent rate recorded in May.
The CPI measures changes in prices paid by urban consumers for a broad basket of goods and services, including food, housing, clothing, transportation, medical care, and energy. Covering over 90 percent of the U.S. population, the all-urban-consumer index fell 0.3 percent in June before seasonal adjustment, reaching 333.952. The index for urban wage earners increased 3.5 percent annually. The next CPI report, covering July 2026, is scheduled for release on August 12.