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

US inflation eased more than expected in June, with the consumer price index falling 0.4% on a seasonally adjusted basis and the annual rate slipping to 3.5% from 4.2% in May. It was the first decline in the yearly rate in five months and the largest monthly drop in the headline index since April 2020. The improvement was driven largely by energy, where prices fell 5.7% for the month as tensions between the United States and Iran temporarily eased, sending gasoline down sharply. Core inflation, which strips out volatile food and energy, was flat on the month and slowed to 2.6% annually, also below forecasts. Both readings came in under the estimates of economists surveyed by Dow Jones. Federal Reserve Chair Kevin Warsh struck a cautious note, warning against declaring victory on inflation given the risk that renewed conflict could push energy costs back up. Despite the softer print, markets still see the central bank as more likely to raise rates than cut them later in the year, with a September move on the table.