WASHINGTON, D.C. / RankWire.AI / – U.S. consumer prices fell 0.4 percent in June, reversing a sharp monthly increase recorded in May. Annual inflation slowed to 3.5 percent from 4.2 percent one month earlier. The June decline marked the largest monthly drop since April 2020. The Consumer Price Index had risen 0.5 percent in May. The U.S. Bureau of Labor Statistics said lower energy prices caused most of the change. Price growth also eased across several core categories.
Energy prices dropped 5.7 percent in June after gaining 3.9 percent during the previous month. Gasoline costs fell 9.7 percent, while fuel oil prices declined 9.2 percent. Electricity prices decreased 1.0 percent, though utility gas service increased 0.5 percent. Energy costs still stood 15.7 percent above their level from June 2025. Gasoline remained 26.7 percent more expensive than one year earlier. Electricity rose 4.0 percent annually, and utility gas increased 3.0 percent.
Core prices showed no monthly increase after advancing 0.2 percent in May. The core measure excludes food and energy, which often record larger price changes. Core inflation slowed to 2.6 percent annually from 2.9 percent in May. Shelter costs gained 0.1 percent, their smallest monthly rise since January 2021. Rent increased 0.1 percent, while owners’ equivalent rent rose 0.2 percent. Hotel and motel prices fell 2.3 percent during June.
Lower fuel costs drive inflation decline
Food prices rose 0.2 percent for a second consecutive month. Grocery prices and restaurant prices each increased by the same monthly rate. The broader food index stood 3.0 percent above its year-earlier level. Egg prices climbed 4.3 percent, while dairy costs increased 1.2 percent. Coffee prices dropped 2.0 percent, and fruit and vegetable prices fell 0.2 percent. Full-service restaurant meals gained 0.4 percent, while other food-away-from-home categories recorded smaller changes.
Several major household expenses also became cheaper in June. Motor vehicle insurance prices fell 2.0 percent, while communication costs declined 1.5 percent. Apparel prices dropped 0.6 percent, and used vehicle prices decreased 0.2 percent. Medical care costs edged down 0.1 percent, although hospital services rose slightly. Recreation prices increased 0.5 percent. Household furnishings and personal care costs each gained 0.2 percent. New vehicle prices remained unchanged after falling during May.
Federal Reserve receives fresh inflation data
The report arrived before the Federal Reserve’s scheduled policy meeting on July 28 and July 29. Officials kept the federal funds rate between 3.50 percent and 3.75 percent at their June meeting. The central bank maintains a long-term inflation target of 2 percent. June’s annual CPI reading remained above that level despite the sharp slowdown from May. The monthly figures showed falling headline prices and stable core prices across the U.S. economy.
The CPI measures changes in prices paid by urban consumers for goods and services. Its categories include housing, food, transportation, energy, clothing and medical care. The main urban consumer index covers more than 90 percent of the U.S. population. Before seasonal adjustment, consumer prices fell 0.3 percent in June. The all-items index reached 333.952. The index for urban wage earners increased 3.5 percent annually. The July inflation report remains scheduled for release on August 12.