The Consumer Price Index declined 0.4 percent from May, according to figures released Tuesday by the Department of Labor. It was the largest monthly decrease since 2020. Compared with June of the previous year, consumer prices were 3.5 percent higher. The report was considerably better than economists had expected. Forecasters had predicted that prices would […]

The Consumer Price Index declined 0.4 percent from May, according to figures released Tuesday by the Department of Labor. It was the largest monthly decrease since 2020. Compared with June of the previous year, consumer prices were 3.5 percent higher.

The report was considerably better than economists had expected. Forecasters had predicted that prices would fall by just 0.1 percent after increasing 0.5 percent in May. They had also projected an annual inflation rate of 3.8 percent, down from 4.2 percent the previous month.

Core prices, which exclude the more volatile food and energy categories, were unchanged from May. That was the strongest monthly reading since January 2021. Over the past year, core inflation increased 2.6 percent.

The recent trend also suggests that inflation has continued to move closer to the Federal Reserve’s preferred range. Based on the rounded monthly figures, overall consumer prices rose at an annualized rate of about 2.8 percent during the past three months. Core prices increased at an annualized rate of roughly 2.4 percent over three months and 2.6 percent over six months.

Lower energy costs were the biggest reason for the June decline. Energy prices dropped 5.7 percent after rising 3.9 percent in May, 3.8 percent in April, and 10.9 percent in March.

Gasoline prices fell even more sharply, declining 9.7 percent for the month. That followed increases of 7 percent in May, 5.4 percent in April, and 21.2 percent in March. The reversal provided noticeable relief to consumers after several months of rising costs at the pump.

Food prices continued to increase, though at a relatively modest pace. Grocery prices rose 0.2 percent in June and were 2.7 percent higher than a year earlier. Prices at restaurants also climbed 0.2 percent for the month and were up 3.4 percent over the past year.

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Core goods prices, which exclude food and energy, declined 0.2 percent. They were only 0.8 percent higher than a year ago, suggesting that inflation for many physical products remained subdued.

Prices for services excluding energy-related services were unchanged in June and rose 3.2 percent over the previous 12 months. Services excluding shelter costs fell 0.2 percent, the best monthly result since January 2021.

Vehicle prices were also relatively stable. Prices for new cars and trucks were unchanged for the month and increased just 0.5 percent over the year. Used vehicle prices fell 0.2 percent in June and were down 2.1 percent from a year earlier. Motor vehicle insurance costs declined 2 percent.

Apparel prices dropped 0.6 percent, while medical care costs edged down 0.1 percent.

Housing inflation, which has remained one of the most persistent parts of the inflation picture, also showed signs of cooling. Shelter prices rose only 0.1 percent, the smallest monthly increase in more than five years. They were still 3.3 percent higher than a year ago.

Rent increased 0.1 percent, while the government’s measure of homeownership costs rose 0.2 percent.

Prices for some technology products also fell. Computer prices declined 0.7 percent, while smartphone prices dropped 0.8 percent. Those decreases came despite concerns that strong demand for artificial intelligence chips and related technology could push up the cost of consumer electronics.

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The weaker-than-expected inflation report could reduce the likelihood that the Federal Reserve will raise interest rates this summer. Financial markets had been assigning a meaningful chance to a rate increase at the Fed’s meeting later in the month. Several central bank officials had also suggested that another unusually strong inflation report could support additional tightening.

The low level of inflation in core goods may also complicate predictions that President Donald Trump’s tariffs would quickly lead to higher consumer prices. Critics, including Democrats during the 2024 campaign, described tariffs as a national sales tax that would ultimately be passed on to shoppers.

The June report does not prove that tariffs will have no effect on prices over time, but it offers little evidence that they caused a broad increase in consumer goods prices during the month. For now, the figures point to easing inflation, lower energy costs, and a more favorable outlook for consumers than economists had anticipated.

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