WASHINGTON, D.C. / RankWire.AI / – In June, U.S. consumer prices decreased by 0.4 percent, 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) followed a 0.5 percent rise in May. This monthly decline was the largest since April 2020. The yearly inflation rate also dropped from 4.2 percent in May. The report examined prices paid by urban consumers across key spending categories.
The drop was primarily driven by energy prices, which fell 5.7 percent after increasing 3.9 percent in May. Gasoline prices declined 9.7 percent, electricity costs decreased by 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 the same period last year. Gasoline was 26.7 percent above its year-earlier level, 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 rising 0.2 percent in May. Core inflation increased 2.6 percent from a year earlier, down from 2.9 percent in May. Shelter costs rose just 0.1 percent, marking the smallest monthly increase since January 2021. Rent grew 0.1 percent, while owners’ equivalent rent increased 0.2 percent. Lodging away from home decreased by 2.3 percent. Services excluding energy remained flat, but rose 3.2 percent on an annual basis.
Energy prices drive the monthly decline
Food prices edged up 0.2 percent for the second consecutive month, and were 3.0 percent higher than 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 by 3.4 percent. Egg prices climbed 4.3 percent in June, 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 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 dipped 0.2 percent, and medical care costs declined 0.1 percent. Hospital service prices increased by 0.1 percent despite the overall medical care decrease. Recreation prices rose 0.5 percent, household furnishings and personal care each gained 0.2 percent, and new vehicle prices remained unchanged after falling in May.
Federal Reserve maintains current interest rate
The June report provides policymakers with a fresh inflation measure ahead of their next rate decision. The Federal Reserve has kept its benchmark interest rate within the range of 3.50 percent to 3.75 percent. In June, officials unanimously agreed to maintain this range. The upcoming 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 also remains lower than the 4.2 percent rate recorded in May.
The CPI measures changes in the 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 adjustment, the index declined 0.3 percent in June, 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.