US Inflation Cools to 3.5% in June as Energy Prices Tumble

US inflation eased more than expected in June, with the Consumer Price Index falling 0.4% on a seasonally adjusted basis, the largest monthly decline since April 2020, according to the Bureau of Labor Statistics. That pulled the annual headline rate down to 3.5% from 4.2% in May, the first slowdown in five months and below forecasts of 3.8%. Core inflation, which strips out food and energy, was flat on the month, leaving the 12-month core rate at 2.6%, down from 2.9%. The decline was driven overwhelmingly by energy, which dropped 5.7% for the month as a temporary ceasefire in the Iran war sent gasoline prices down about 10%. Shelter and food costs continued to rise modestly. Economists cautioned that the relief may prove short-lived, since hostilities have since flared again and US crude climbed roughly 12% in early July, threatening to push energy costs back up. Markets read the softer report as reducing the odds of a July Federal Reserve rate hike, though officials including Fed Governor Christopher Waller stressed they want to see several months of improvement before easing concerns.