WASHINGTON, D.C. / RankWire.AI / – In June, U.S. consumer prices declined by 0.4 percent, leading to a slowdown in annual inflation to 3.5 percent. According to the U.S. Bureau of Labor Statistics, the Consumer Price Index rose by 0.5 percent in May. This June decrease marked the most significant monthly drop since April 2020. The yearly inflation rate also decreased from 4.2 percent in May. The report analyzed prices paid by urban consumers across major spending sectors.
The monthly decline was primarily driven by energy prices, which fell 5.7 percent after a 3.9 percent rise in May. Gasoline prices dropped by 9.7 percent, electricity costs decreased by 1.0 percent, and utility gas prices increased by 0.5 percent. Fuel oil prices also declined by 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 increased by 4.0 percent, and utility gas rose by 3.0 percent annually.
Core consumer prices, which exclude food and energy, remained unchanged in June after a 0.2 percent increase in May. Core inflation was 2.6 percent higher than 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, while owners’ equivalent rent grew by 0.2 percent. Lodging away from home decreased by 2.3 percent. Services excluding energy remained flat but rose 3.2 percent annually.
Energy prices drive the monthly decline
Food prices rose by 0.2 percent for the second consecutive month and were 3.0 percent above June 2025 levels. Grocery and restaurant prices each increased by 0.2 percent during the month. Food-at-home prices advanced by 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 fell 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 fell 2.0 percent, communication prices dropped 1.5 percent, and apparel costs decreased by 0.6 percent. Used car and truck prices slipped by 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 costs. Recreation prices gained 0.5 percent. Household furnishings and personal care each rose 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 a fresh inflation reading ahead of their next 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 that range. Their upcoming policy meeting is scheduled from July 28 through July 29. The Fed’s inflation target remains at 2 percent, below the latest 3.5 percent annual CPI figure. Inflation also remains lower than the 4.2 percent rate recorded in May.
The Consumer Price Index measures changes in prices paid by urban consumers for a broad array of goods and services, including food, housing, clothing, transportation, medical care, and energy. Covering over 90 percent of the U.S. population, the index before seasonal adjustment fell 0.3 percent in June to 333.952. The index for urban wage earners increased 3.5 percent annually. The next CPI report, covering July 2026, is scheduled for release on August 12.