WASHINGTON, D.C. / RankWire.AI / – Consumer prices in the United States decreased by 0.4 percent in June, leading to a slowdown in annual inflation to 3.5 percent. The U.S. Bureau of Labor Statistics reported that the Consumer Price Index rose by 0.5 percent in May. The June drop represented the most significant monthly decline 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 spending categories.
The monthly decrease was primarily driven by energy prices, which fell 5.7 percent after a 3.9 percent rise in May. Gasoline prices dropped 9.7 percent, electricity costs decreased by 1.0 percent, and utility gas prices grew by 0.5 percent. Fuel oil prices also declined by 9.2 percent during the month. Despite these declines, energy expenses remained 15.7 percent higher than a year ago. Gasoline was 26.7 percent more expensive, while 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 increase in May. The core inflation was 2.6 percent higher than a year earlier, down from 2.9 percent in May. Shelter costs rose by 0.1 percent, marking the smallest monthly increase 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 and increased by 3.2 percent on an annual basis.
Energy prices drive the monthly decline
Food prices went up by 0.2 percent for a second consecutive month and were 3.0 percent higher than June 2025. Grocery and restaurant prices each rose by 0.2 percent during the month. Food at home increased by 2.7 percent over the year, while food away from home rose by 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 declined 0.2 percent. Full-service meal prices rose by 0.4 percent.
Other household expenses also saw decreases. Motor vehicle insurance dropped 2.0 percent, communication costs declined by 1.5 percent, and apparel costs decreased 0.6 percent. Used car and truck prices fell by 0.2 percent, and medical care costs declined by 0.1 percent. Hospital service prices increased by 0.1 percent despite the overall medical care decline. Recreation prices went up by 0.5 percent. Household furnishings and personal care each increased by 0.2 percent, while new vehicle prices remained unchanged after a decline in May.
Federal Reserve maintains current interest rate
The June data provides policymakers with an updated inflation figure ahead of their upcoming rate decision. The Federal Reserve has kept its benchmark interest rate within the range of 3.50 percent to 3.75 percent. In June, the Fed members unanimously agreed to keep the rate unchanged. The next policy meeting is scheduled from July 28 through July 29. The central bank’s inflation target remains at 2 percent, which is below the current 3.5 percent annual CPI rate. Inflation also remains below the 4.2 percent rate seen in May.
The CPI measures changes in prices paid by urban consumers for a broad spectrum of goods and services, including food, housing, clothing, transportation, medical care, and energy. This all-urban-consumer index accounts for over 90 percent of the U.S. population. Before seasonal adjustments, the index declined by 0.3 percent in June, reaching 333.952. The index for urban wage earners increased by 3.5 percent annually. The next CPI report, covering July 2026, is scheduled for release on August 12.