Consumer prices posted their biggest monthly decline in more than six years during June, offering temporary relief from this year’s inflation surge, according to the Bureau of Labor Statistics.
A broad-based cooldown
The consumer price index fell a seasonally adjusted 0.4% for the month, bringing the annual inflation rate down to 3.5%.
Economists surveyed by Dow Jones had expected a smaller drop of 0.2% and an inflation rate of 3.8%, following the 4.2% reading in May.
The monthly decline was the largest since April 2020.
Core inflation, which strips out food and energy, was flat on the month, putting the 12-month rate at 2.6%, well below the 2.9% consensus forecast.
Energy leads the drop
The energy index slumped 5.7% in June, its steepest monthly fall since April 2020, even as it remained up 15.7% annually.
Gasoline and fuel oil both declined more than 9% for the month.
Services costs also moderated, with shelter rising just 0.1% and transportation services falling 0.3%.
Food prices rose 0.2%, while apparel fell 0.6%.
Fed holds firm
The Fed currently targets its key overnight borrowing rate between 3.5% and 3.75%, and officials remain focused on controlling inflation.
New Fed Chairman Kevin Warsh, delivering remarks to Congress, emphasized the central bank’s priority:
“The Fed’s number one objective is to get monetary policy right — or as near to it as we possibly can. That is our clear and constant aim, the star we steer by.”
Traders lowered the odds of a September rate hike to 63% from over 75% a day earlier, though renewed conflict with Iran and rising oil prices threaten to reverse the relief.
