The annual inflation rate cooled to 3% in June, marking the first time since the pandemic began that the Consumer Price Index (CPI) showed an overall 0.1% decline in the cost of goods and services for a one-month period ending in June, according to federal government data released Thursday.
Lower gas prices contributed significantly to this development, with the U.S. Bureau of Labor Statistics reporting that the index for gasoline fell by 3.8% in June, following a 3.6% decline in May. This decrease more than offset a 0.2% increase in shelter costs for June.
The all-items index declined by 0.1% on a seasonally adjusted basis after remaining unchanged in May. The core index, which excludes more volatile food and energy prices and is often seen as a better measure of underlying inflation, rose by just 0.1% during the same period—its smallest monthly increase since August 2021.
Some items within the core index saw month-to-month increases, including shelter (+0.2%), medical care (+0.2%), motor vehicle insurance (+0.9%), and household furnishings (+0.5%). Conversely, airline fares fell by 5%, while used cars and trucks decreased by 1.5%, and new vehicles were down by 0.2%.
On an annual basis, overall consumer prices increased by 3% for the twelve months ending in June, a slower pace compared to the 3.3% rise recorded for the twelve months ending in May.
Over the past year, the shelter index has risen by 5.2%, accounting for nearly 70% of the total twelve-month increase in the all-items index. Other indexes with notable annual increases include motor vehicle insurance (+19.5%), medical care (+3.3%), personal care (+3.2%), and recreation (+1.3%).
Despite remaining above the Federal Reserve’s target of 2%, June's positive CPI report suggests that long-delayed interest rate cuts may be on the horizon for the Fed, which has maintained interest rates at a two-decade high to cool down economic activity and reduce inflation.
Inflation surged to a forty-year high of 9.1% in June 2022, prompting rapid interest rate hikes from the Fed over subsequent months—the central bank last raised its benchmark rate to 5.3% in July 2023 and has held it steady since then.
Following the release of June's CPI report, stock market reactions were mixed: The Dow Jones Industrial Average rose while both S&P and NASDAQ traded lower.
The full CPI report for June can be accessed here.
