US June inflation cooled to 3.5% as energy prices fell
What's next: Traders cut the odds of a September Fed rate hike after core CPI came in flat for the month at 2.6% year over year.
US consumer prices cooled more than expected in June, with the annual inflation rate falling to 3.5% from 4.2% in May as energy costs dropped sharply. The Consumer Price Index fell 0.4% on the month, its biggest decline since April 2020, while core inflation, which excludes food and energy, was flat and slowed to 2.6% annually. Energy prices fell 5.7% in June, with gasoline and fuel oil both down more than 9%. Shelter rose 0.1%, transportation services fell 0.3% and food prices edged up 0.2%. Markets rallied after the report and Treasury yields moved lower, though investors still largely expect the Federal Reserve to raise rates in September. Economists cautioned the relief could fade if renewed US-Iran tensions push oil prices higher again.