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 (CPI) experienced a 0.5 percent rise in May. This June decline marked the largest monthly decrease since April 2020. The yearly inflation rate also dropped from 4.2 percent in May. The report analyzed costs paid by urban consumers across key spending sectors.
The monthly drop was primarily driven by lower energy prices, which fell 5.7 percent after a 3.9 percent increase in May. Gasoline prices decreased 9.7 percent, electricity costs declined 1.0 percent, and utility gas prices increased by 0.5 percent. Fuel oil prices also fell 9.2 percent during the month. Despite these decreases, energy costs remained 15.7 percent above the levels from the same period last year. Gasoline was 26.7 percent higher, electricity increased by 4.0 percent, and utility gas rose 3.0 percent on an annual basis.
Core consumer prices, which exclude food and energy, stayed flat in June after rising 0.2 percent in May. Core inflation increased 2.6 percent year-over-year, down from 2.9 percent in May. Shelter costs grew just 0.1 percent, marking the smallest monthly increase since January 2021. Rent increased 0.1 percent, while owners’ equivalent rent rose 0.2 percent. Lodging away from home dropped 2.3 percent. Excluding energy services, prices for services were unchanged and rose 3.2 percent annually.
Energy prices drive the monthly decline
Food prices edged up 0.2 percent for the second consecutive month, remaining 3.0 percent above June 2025 levels. Grocery and restaurant prices each increased by 0.2 percent during the month. Food-at-home prices rose 2.7 percent over the year, while food away from home climbed 3.4 percent. Egg prices surged 4.3 percent in June, dairy prices increased 1.2 percent, and coffee prices fell 2.0 percent. Fruit and vegetable prices decreased by 0.2 percent. Full-service meal prices rose 0.4 percent.
Other household expenses also saw declines. Motor vehicle insurance dropped 2.0 percent, communication costs fell 1.5 percent, and apparel prices decreased 0.6 percent. Used car and truck prices declined 0.2 percent, with medical care costs decreasing 0.1 percent. Hospital service prices increased slightly by 0.1 percent despite the broader decline in medical costs. Recreation prices went up 0.5 percent. Household furnishings and personal care each increased 0.2 percent, while prices for new vehicles remained unchanged after falling in May.
Federal Reserve maintains current interest rates
This June report provides policymakers with a fresh inflation figure ahead of their upcoming 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. The next policy meeting is scheduled from July 28 through July 29. The Federal Reserve’s inflation target remains at 2 percent, which is below the current 3.5 percent annual CPI rate. Inflation continues to be lower than the 4.2 percent rate 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. Covering more than 90 percent of the U.S. population, the index for all urban consumers fell 0.3 percent in June before seasonal adjustments, reaching 333.952. The index for urban wage earners increased 3.5 percent year-over-year. The upcoming CPI report for July 2026 is scheduled for release on August 12.