WASHINGTON, D.C. / RankWire.AI / – Consumer prices in the United States decreased by 0.4 percent in June, leading to a slowdown in the yearly inflation rate to 3.5 percent. According to the U.S. Bureau of Labor Statistics, the Consumer Price Index experienced a 0.5 percent rise in May. This June decline represents the largest monthly drop since April 2020. The annual inflation rate also fell from 4.2 percent in May. The report examined prices paid by urban consumers across key spending categories.
The primary driver behind the monthly decrease was energy prices, which fell 5.7 percent after a 3.9 percent increase in May. Gasoline prices declined 9.7 percent, electricity costs dropped 1.0 percent, while utility gas prices increased by 0.5 percent. Fuel oil prices also decreased by 9.2 percent during the month. Despite these drops, energy expenses remained 15.7 percent higher than they were a year earlier. Gasoline was 26.7 percent more expensive, electricity rose 4.0 percent, and utility gas increased 3.0 percent on an annual basis.
Core inflation, which excludes food and energy, remained unchanged in June after a 0.2 percent rise in May. The inflation rate for core prices was 2.6 percent compared to the previous year, down from 2.9 percent in May. Shelter costs increased by 0.1 percent, marking the smallest monthly growth since January 2021. Rent increased by 0.1 percent, while owners’ equivalent rent rose 0.2 percent. Lodging away from home decreased by 2.3 percent. Services excluding energy remained flat but rose 3.2 percent annually.
Energy prices primarily responsible for the monthly drop
Food prices increased by 0.2 percent for the second consecutive month and were 3.0 percent higher than in June 2025. Both grocery and restaurant prices rose 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 went up 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 increased by 0.4 percent.
Other household expenses also saw declines. Motor vehicle insurance decreased 2.0 percent, communication costs dropped 1.5 percent, and apparel costs fell 0.6 percent. Used car and truck prices slipped 0.2 percent, while medical care costs decreased by 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 a decline in May.
Federal Reserve maintains current interest rate
The June inflation report provides policymakers with an updated inflation measure 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, members unanimously agreed to hold the rate within this range. The next policy meeting is scheduled from July 28 to July 29. The Federal Reserve’s inflation target remains 2 percent, which is below the current 3.5 percent annual CPI rate. Inflation also remains lower than the 4.2 percent rate recorded in May.
The Consumer Price Index measures the changes in prices paid by urban consumers for a broad basket of goods and services, including food, housing, clothing, transportation, medical care, and energy. Covering more than 90 percent of the U.S. population, the index fell by 0.3 percent before seasonal adjustments in June, reaching 333.952. The index for urban wage earners increased 3.5 percent annually. The next CPI report, covering July 2026, will be released on August 12.