Inflation Eases After Energy Prices Drop

In June, consumer prices decreased 0.4% from May, the largest monthly decline since April 2020, but rose 3.5% over the year, down from the 4.2% annual rise in May. Core CPI, which excludes more volatile energy and food prices, stayed the same in June but increased 2.6% over the year, down from the 2.9% 12-month growth the month prior.

Energy costs fell 5.7% over the month in June, after rising 3.9% in May. Over the year, energy costs climbed 15.7%, after surging 23.5% year-over-year in May. Within the energy index, gasoline prices dropped 9.7% but were up 26.7% over the year, while fuel oil prices decreased 9.2% month-over-month but jumped 42.9% year-over-year. Meanwhile, electricity prices stepped down 1.0% in June but increased 4.0% from June 2025, while natural gas prices rose 0.5% over the month and 3.0% over the year.

In June, food prices ticked up 0.2% over the month and increased 3.0% over the year, down slightly from the 3.1% year-over-year advance in May. Prices for food at home inched up 0.2% from May and rose 2.7% from June 2025, while prices for food away from home moved up 0.2% month-over-month and 3.4% year-over-year. Of the different food groups, beef and veal, coffee and fresh vegetables rose at the fastest pace, climbing 11.8%, 12.9% and 9.9% over the year, respectively.

The shelter index increased 0.1% from May and 3.3% over the year, down slightly from the 3.4% annual gain in May. Meanwhile, prices for used cars and trucks stepped down 0.2% over the month and 1.8% over the year, while new vehicle prices were unchanged over the month but rose 0.5% from June 2025. At the same time, prices for motor vehicle maintenance and repair grew 1.1% month-over-month and 7.0% year-over-year.

The headline inflation rate is still well above the Federal Reserve’s target of 2.0% and remains above 2025 lows, with increased pressure from the war in the Middle East. Federal Reserve officials held their interest rate target steady at their June meeting, and markets anticipate that the Federal Open Market Committee will keep its interest rate target unchanged again at the next meeting later this month.