WASHINGTON, D.C. / RankWire.AI / – U.S. consumer prices decreased by 0.4 percent in June, leading to a slowdown in the annual inflation rate to 3.5 percent. The U.S. Bureau of Labor Statistics reported that the Consumer Price Index followed a 0.5 percent rise in May. This June decline marked the most significant monthly drop since April 2020. The yearly inflation rate also declined from 4.2 percent in May. The report analyzed prices paid by urban consumers across key expenditure categories.
Energy prices primarily drove the monthly decrease, falling 5.7 percent after a 3.9 percent increase in May. Gasoline prices declined 9.7 percent, electricity costs fell 1.0 percent, and utility gas prices rose 0.5 percent. Fuel oil prices also dropped 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 above last year, electricity increased 4.0 percent, and utility gas rose 3.0 percent annually.
Core consumer prices, which exclude food and energy, remained unchanged in June after rising 0.2 percent in May. Core inflation was up 2.6 percent from the previous year, down from 2.9 percent in May. Shelter costs rose 0.1 percent, marking the smallest monthly increase since January 2021. Rent increased 0.1 percent, while owners’ equivalent rent increased 0.2 percent. Lodging away from home decreased 2.3 percent. Services excluding energy remained flat and rose 3.2 percent on an annual basis.
Energy prices drive the monthly decrease
Food prices grew 0.2 percent for the second consecutive month and were 3.0 percent higher than in 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 year, while food away from home increased 3.4 percent. Egg prices climbed 4.3 percent in June, dairy prices increased 1.2 percent, coffee prices fell 2.0 percent, and fruit and vegetable prices decreased 0.2 percent. Full-service meal prices increased 0.4 percent.
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, and medical care costs dropped 0.1 percent. Hospital service prices rose 0.1 percent despite the overall decline in medical care costs. Recreation prices increased 0.5 percent. Household furnishings and personal care each went up 0.2 percent, and new vehicle prices remained steady after falling in May.
Federal Reserve maintains current interest rate
The June CPI 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 this range. Their next policy meeting is scheduled from July 28 to July 29. The Federal Reserve’s inflation target remains 2 percent, which is below the current 3.5 percent annual CPI rate. 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. The all-urban-consumer index covers more than 90 percent of the U.S. population. Before seasonal adjustment, the index decreased 0.3 percent in June, reaching 333.952. The index for urban wage earners increased 3.5 percent annually. The next CPI release, covering July 2026, is scheduled for August 12.