WASHINGTON, D.C. / RankWire.AI / – Consumer prices across the United States decreased by 0.4 percent in June, leading to a slowdown in the annual inflation rate to 3.5 percent. According to the U.S. Bureau of Labor Statistics, the Consumer Price Index (CPI) followed a 0.5 percent rise in May. This monthly decline marked the most substantial drop since April 2020. Meanwhile, the yearly inflation rate declined from 4.2 percent in May. The report encompasses prices paid by urban consumers across key spending categories.
The decrease was driven primarily by falling energy prices, which dropped 5.7 percent after a 3.9 percent rise in May. Gasoline prices fell 9.7 percent, electricity costs declined by 1.0 percent, and utility gas prices increased by 0.5 percent. Fuel oil prices also decreased by 9.2 percent during the month. Despite these declines, energy costs 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 year-over-year.
Core inflation, which excludes food and energy, remained unchanged in June after rising 0.2 percent in May. The core inflation rate was 2.6 percent compared to the previous year, down from 2.9 percent in May. Shelter costs increased by 0.1 percent, marking the smallest monthly rise since January 2021. Rent prices increased by 0.1 percent, while owners’ equivalent rent grew by 0.2 percent. Lodging away from home decreased by 2.3 percent. Services excluding energy remained flat and rose 3.2 percent annually.
Energy prices lead the monthly decline
Food prices inched up by 0.2 percent for the second consecutive month, standing 3.0 percent above June 2025. Grocery and restaurant prices each increased by 0.2 percent during the month. Food-at-home prices rose 2.7 percent over the past year, while food away from home increased by 3.4 percent. Egg prices climbed 4.3 percent in June, and dairy prices rose 1.2 percent. Conversely, coffee prices fell 2.0 percent, and fruit and vegetable prices decreased by 0.2 percent. Full-service meal prices rose 0.4 percent.
Several other household expenses also declined. Motor vehicle insurance fell 2.0 percent, communication costs dropped 1.5 percent, and apparel costs decreased by 0.6 percent. Used car and truck prices slipped 0.2 percent, and medical care costs fell 0.1 percent. Hospital service prices increased by 0.1 percent despite the overall decline in medical expenses. Recreation prices rose 0.5 percent. Household furnishings and personal care each increased by 0.2 percent, while new vehicle prices remained unchanged after a decline in May.
Federal Reserve maintains current interest rate
The June inflation report provides policymakers with an updated inflation measure 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 hold the rate within that range. The next policy meeting is scheduled from July 28 through July 29. The Fed’s inflation target remains at 2 percent, which is below the latest 3.5 percent annual CPI reading. Inflation is also lower than the 4.2 percent rate recorded in May.
The CPI measures changes in prices paid by urban consumers for a broad basket of goods and services, including food, housing, clothing, transportation, medical care, and energy. This all-urban-consumer index covers more than 90 percent of the U.S. population. Before seasonal adjustments, the index fell 0.3 percent in June, reaching 333.952. The index for urban wage earners increased by 3.5 percent annually. The next monthly CPI report, covering July 2026, is scheduled for release on August 12.