Topline
Inflation cooled faster than expected in June, with a brief peace deal between Iran and the U.S. lowering oil prices, according to federal data published Tuesday, as Federal Reserve officials suggested long-term price increases would soon be a “thing of the past.”
Fuel costs boosted inflation to its highest rate in years the previous month.
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Key Facts
Consumer prices rose 3.5% from June 2025 and dropped 0.5% from May and June, the Bureau of Labor Statistics reported, well below consensus analyst estimates of a 3.9% annual increase, according to FactSet.
That’s the largest month-to-month decline in consumer prices since April 2020 (0.8%), according to the agency.
The price of gas fell 9.7% from May to June, the largest decrease of any item tracked by the Bureau of Labor Statistics, while fuel oil prices dropped 9.2% and the broader energy sector fell 5.7%.
Core CPI, an inflation reading that excludes the volatile energy and food sectors, was 2.6% in June, below estimates of 2.9%.
what to watch for
Federal Reserve Chair Kevin Warsh, in prepared remarks to Congress, pledged the central bank will “get monetary policy right” and said “the inflation surge of the last five years will be a thing of the past.” Warsh added the Fed has “no tolerance for persistently elevated inflation” and that by setting policy “right,” surging inflation over the last five years will be “a thing of the past.” Warsh did not clarify what he considered to be the “right” policy.
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.
further reading
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