Topline
Inflation eased more sharply than analysts had anticipated in June, helped by lower oil prices following a short-lived peace agreement between Iran and the U.S., federal data released Tuesday showed, as Federal Reserve officials signaled that sustained price pressures could soon fade into the past.
A month earlier, rising fuel costs had pushed inflation to its highest level in years.
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Key Facts
Consumer prices increased 3.5% compared with June 2025 and declined 0.5% between May and June, the Bureau of Labor Statistics said, coming in well under FactSet’s consensus forecast for a 3.9% annual gain.
The agency said the monthly drop marked the steepest decline in consumer prices since April 2020, when prices fell 0.8%.
Gasoline prices slid 9.7% from May to June, the biggest decrease among all categories tracked by the Bureau of Labor Statistics, while fuel oil fell 9.2% and overall energy prices declined 5.7%.
Core CPI, which strips out the often-volatile food and energy categories, registered 2.6% in June, also below expectations of 2.9%.
what to watch for
Federal Reserve Chair Kevin Warsh, in prepared remarks for Congress, said the central bank would “get monetary policy right” and argued that “the inflation surge of the last five years will be a thing of the past.” Warsh also stressed the Fed has “no tolerance for persistently elevated inflation,” though he did not specify what he viewed as the “right” policy path.
big number
61.3%. Those are the combined odds priced in by futures traders of an interest rate hike next month as of Tuesday morning, according to CME Group’s FedWatch tool. Those odds steadily increase through December, hitting 82.4% in the Federal Open Market Committee’s last meeting of the year, before rising to a high of 89.2% by April 2027. In the FOMC’s meeting last month, “many” officials argued that interest rates would be “within or slightly below” the current range by the end of the year, even as “many other” participants assessed that interest rates would be higher.
key background
The Federal Reserve has cited elevated inflation in recent months as the reason for votes to keep interest rates at 3.5%-3.75%. Consumer prices jumped earlier this year shortly after the U.S. struck Iran, which set oil and gas prices surging. There was a brief reprieve at the pump after an interim peace deal was reached. Still, they soon spiked after President Donald Trump announced earlier this month the deal was “over” and that the U.S. would “probably” hit Iran with strikes again, noting he was “not sure” he wanted another peace agreement.
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