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