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 noted that the Consumer Price Index (CPI) followed a 0.5 percent rise in May. This decline marked the largest monthly drop since April 2020. The yearly inflation rate also dropped from 4.2 percent in May. The report focused on prices paid by urban consumers across key expenditure categories.
The monthly decrease was driven by falling energy prices, which declined 5.7 percent after a 3.9 percent increase in May. Gasoline prices fell 9.7 percent, electricity costs dropped 1.0 percent, and utility gas prices rose 0.5 percent. Fuel oil prices also declined 9.2 percent during the month. Despite these decreases, energy costs remained 15.7 percent higher than a year earlier. Gasoline was 26.7 percent more expensive, electricity rose 4.0 percent, and utility gas increased 3.0 percent on an annual basis.
Core consumer prices, which exclude food and energy, remained unchanged in June after a 0.2 percent rise in May. Core inflation was up 2.6 percent from a year earlier, down from 2.9 percent in May. Shelter costs increased by 0.1 percent, marking the smallest monthly rise since January 2021. Rent increased by 0.1 percent, owners’ equivalent rent gained 0.2 percent, and lodging away from home fell 2.3 percent. Services excluding energy remained flat, with a 3.2 percent increase annually.
Energy prices drive the monthly decline
Food prices rose by 0.2 percent for the second consecutive month and are 3.0 percent higher than June 2025. Grocery and restaurant prices each increased by 0.2 percent during the month. Food-at-home prices went up 2.7 percent over the year, while food away from home increased 3.4 percent. Egg prices surged 4.3 percent in June, dairy prices rose 1.2 percent, coffee prices fell 2.0 percent, and fruit and vegetable prices decreased 0.2 percent. Prices for full-service meals increased by 0.4 percent.
Several other household expenses also declined. Motor vehicle insurance dropped 2.0 percent, communication costs decreased 1.5 percent, and apparel costs fell 0.6 percent. Used car and truck prices declined 0.2 percent, while medical care costs decreased 0.1 percent. Hospital service prices rose 0.1 percent despite the overall decline in medical expenses. Recreation prices increased by 0.5 percent. Household furnishings and personal care each gained 0.2 percent, and new vehicle prices remained unchanged after a decline in May.
Federal Reserve maintains current interest rate
The June report provides policymakers with a fresh inflation update ahead of their upcoming rate decision. The Federal Reserve has kept its benchmark interest rate between 3.50 percent and 3.75 percent. In June, officials unanimously agreed to keep the rate within this range. The next policy meeting is scheduled from July 28 through July 29. The Fed’s inflation target remains 2 percent, which is below the latest 3.5 percent annual CPI rate. Inflation also remains below the 4.2 percent rate recorded in May.
The CPI measures price changes paid by urban consumers for a broad spectrum of goods and services, including food, housing, clothing, transportation, medical care, and energy. The all-urban-consumer index, representing over 90 percent of the U.S. population, fell 0.3 percent in June before seasonal adjustment, reaching 333.952. The index for urban wage earners increased by 3.5 percent annually. The upcoming CPI report covering July 2026 is set for release on August 12.