U.S. consumer prices unexpectedly fell in June, marking the first decline since May 2020. The Consumer Price Index (CPI) decreased by 0.1% last month, after remaining unchanged in May. This dip was largely driven by a 3.8% drop in gasoline prices, following a 3.6% decrease in May. Shelter costs, a significant component of the CPI, rose moderately by 0.2% after a 0.4% increase in the previous month.
Over the last 12 months ending in June, the all-items CPI increased 3.0%, which is a smaller rise compared to the 3.3% increase in the 12 months ending May. The core CPI, which excludes volatile food and energy components, increased 0.1% in June and rose 3.3% year-on-year. The energy index fell 2.0% in June, and food prices saw a 0.2% increase, with food away from home rising 0.4% and food at home increasing 0.1%.
Economists have suggested that this inflation data might prompt the Federal Reserve to focus more on the labor market. Financial markets are now pricing in an approximately 85% chance of a rate cut at the Fed's September meeting, an increase from about 70% before the report. Two rate cuts are anticipated for the year, indicating a potential easing of borrowing costs even if inflation remains slightly above the Fed's 2% target.
