By Wall Street Journal Staff / The Wall Street Journal
Consumer prices posted their biggest monthly decline in more than six years in June, offering unexpected relief after months of elevated inflation driven largely by the conflict with Iran.
The Consumer Price Index fell a seasonally adjusted 0.4 percent for the month, bringing the annual inflation rate down to 3.5 percent, according to data released Tuesday by the Bureau of Labor Statistics. Economists had expected a drop of just 0.1 to 0.2 percent and an annual rate of 3.8 percent, following May’s bruising 4.2 percent reading. The monthly decline was the largest since April 2020.
Core inflation, which excludes food and energy, was flat on the month, putting the 12-month rate at 2.6 percent — well below the consensus forecast of 2.9 percent.
Energy prices drove the bulk of the decline, falling 5.7 percent in June — the largest single-month drop in the energy index since April 2020. Gasoline prices fell 9.7 percent and electricity prices declined 1 percent. The easing came as a brief ceasefire in the U.S.-Iran conflict allowed oil prices to pull back roughly 25 percent during the month. However, the ceasefire has since shown signs of deteriorating, raising questions about whether June’s relief will prove temporary.
Food prices rose a modest 0.2 percent. Shelter rose just 0.1 percent. Apparel fell 0.6 percent. Used cars and trucks declined 0.2 percent. New vehicles were flat.
Services costs, which Federal Reserve policymakers monitor closely for longer-run inflation trends, moderated significantly. Services excluding energy were flat on the month — a notable improvement from recent readings.
“It suggests the worst is over, we’re past the peak and inflation should moderate,” said Mark Zandi, chief economist at Moody’s Analytics. “The biggest threat is that things unravel and we’re back to full-blown war.”
Fed Governor Christopher Waller said it would take several months of positive readings to convince him inflation is sustainably moving back toward the central bank’s 2 percent target. The Fed currently holds its benchmark rate in a range of 3.5 to 3.75 percent.
Source: The Wall Street Journal / Bureau of Labor Statistics, July 14, 2026.