Americans got a reprieve from inflation in June, as U.S. consumer prices experienced the largest dip in more than six years, according to Labor Department data released Tuesday.
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The consumer price index fell more than expected, bringing the annual inflation rate down to 3.5%, down from 4.2% in May, the Bureau of Labor Statistics reported Tuesday.
The decline came thanks to a sharp drop in energy prices, providing relief from an inflation surge. But while it represents the largest one-month decrease since April 2020, the report came before the conflict in Iran kicked back up in July, foreshadowing another surge in energy prices.
The CPI is the primary metric used to gauge inflation in the U.S. economy by tracking consumers’ typical purchases of goods and services.
From May to June, the broader index fell 0.4%, while core CPI, which excludes food and energy, was flat on the month. Compared to the same period a year earlier, core CPI was up 2.6%, down from 2.9% in May. The broader CPI’s monthly decline was driven largely by cooling gas prices.
This also beat the Dow Jones consensus estimate of a 3.8% annual rate and a 0.2% monthly drop.
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Energy represented the largest factor for the fall in June’s inflation, as the CPI for energy fell 5.7% last month following three consecutive months of increases. Gas prices’ steep decline from a month earlier was 9.7%.
But this new data does not account for the recent energy surge.
After a shaky ceasefire deal to pause fighting in the Middle East was broken, gas prices shot up again, as producers and consumers brace for the uncertain longevity of higher costs.
Brent crude futures spiked above $86 a barrel Tuesday morning, hitting one-month highs as clashes in the Middle East and renewed U.S. naval blockades on Iranian ports in the Strait of Hormuz rattled energy markets.
This new report comes as the Federal Reserve is unconvinced that inflation will get back on track to the central bank’s 2% target.
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