WASHINGTON, D.C. / RankWire.AI / – Consumer prices in 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) experienced a 0.5 percent rise in May. The June drop marks the most significant monthly decline since April 2020. The yearly inflation rate also declined from 4.2 percent in May. The report encompasses prices paid by urban consumers across key expenditure sectors.
The primary factor behind the monthly decrease was energy prices, which fell 5.7 percent after a 3.9 percent increase in May. Gasoline prices dropped 9.7 percent, electricity costs declined 1.0 percent, and utility gas prices rose 0.5 percent. Fuel oil prices also decreased by 9.2 percent during the month. Despite these reductions, energy expenses remained 15.7 percent higher than a year earlier. Gasoline was 26.7 percent above last year’s levels, 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 a 0.2 percent rise in May. Core inflation was 2.6 percent higher than a year ago, down from 2.9 percent in May. Shelter costs increased by 0.1 percent, marking the smallest monthly gain since January 2021. Rent rose 0.1 percent, while owners’ equivalent rent increased 0.2 percent. Lodging away from home decreased 2.3 percent. Services excluding energy remained flat but rose 3.2 percent on an annual basis.
Energy prices drive the monthly decrease
Food prices increased by 0.2 percent for a second consecutive month and were 3.0 percent higher than June 2025. Grocery and restaurant prices each rose 0.2 percent during the month. Food-at-home prices advanced 2.7 percent over the 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. Coffee prices fell 2.0 percent, and fruit and vegetable prices decreased 0.2 percent. Full-service meal prices increased by 0.4 percent.
Other household expenses also saw declines. 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, while medical care costs edged down 0.1 percent. Hospital service prices rose 0.1 percent despite the overall decline in medical expenses. Recreation prices increased by 0.5 percent. Household furnishings and personal care each gained 0.2 percent, while new vehicle prices remained unchanged after falling in May.
Federal Reserve maintains current interest rates
The June inflation data provides policymakers with an updated figure 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 keep the rate within that range. Their next policy meeting is scheduled from July 28 through July 29. The Fed’s inflation target remains 2 percent, which is below the latest 3.5 percent annual CPI rate. Inflation continues to be lower than the 4.2 percent rate recorded in May.
The CPI measures changes in prices paid by urban consumers for a wide range of goods and services, including food, housing, clothing, transportation, medical care, and energy. Covering more than 90 percent of the U.S. population, the all-urban-consumer index fell 0.3 percent in June before seasonal adjustment, reaching 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.