WASHINGTON – US consumer inflation slowed more than expected in June, but that will probably offer little comfort to households or rule out an interest rate increase from the Federal Reserve, with the conflict in the Middle East still unresolved.
The consumer price index (CPI) increased by a still-high 3.5 per cent in the 12 months through June after surging 4.2 per cent in May, which was the largest year-on-year rise since April 2023, data from the Labor Department’s Bureau of Labor Statistics showed on July 14.
The CPI fell 0.4 per cent over the month after advancing 0.5 per cent in May.
Economists polled by Reuters had forecast the CPI rising 3.8 per cent year-on-year and dipping 0.1 per cent on a monthly basis.
The pullback in the CPI mostly reflects a retreat in petrol prices from multi-year highs, as a fragile ceasefire between the US and Iran took hold in June. That truce, however, collapsed last week after commercial tankers came under fire in the Strait of Hormuz, triggering military strikes between the United States and Iran.
Petrol prices have reversed course as a result, with the national average rising to US$3.86 a gallon on July 14 from US$3.79 a week earlier, data from motorist advocacy group AAA showed.
Further increases are likely as oil prices rose to a four-week high on July 14 after the US reimposed a naval blockade of Iran.
President Donald Trump said on July 13 the US would reinstate a blockade in the Strait of Hormuz, a vital route for global oil supplies, that has become one of the main battlegrounds of the conflict.
Excluding the volatile food and energy components, the CPI increased 2.6 per cent year-on-year in June after rising 2.9 per cent in May.
The so-called core CPI inflation was unchanged over the month, after gaining 0.2 per cent in May.
The US central bank tracks the personal consumption expenditures price indexes for its 2 per cent inflation target.
Inflation was last below 2 per cent in early 2021.
Minutes of the Fed’s June 16 to 17 meeting showed policymakers’ concerns about inflation mounted in June. The Fed left its benchmark interest rate unchanged in the 3.5 per cent to 3.75 per cent range at the June meeting, though new projections revealed a growing sentiment around a likely rate hike in 2026.
Prior to the inflation data, financial markets were pricing in a roughly 51.9 per cent chance of the Fed raising borrowing costs at its Sept 15 to 16 policy meeting, according to CME’s FedWatch tool. REUTERS
