key takeaways:
- The Labor Department said on July 14 that US inflation eased in June as prices fell 0.4% from May and annual inflation eased to 3.5%.
- The decline was led by a decline in gas, clothing and used car prices, while rising oil prices due to US-Iran tensions could reverse the progress.
- Federal Reserve policymakers remained divided on interest rates, with some supporting a hike and others waiting for clear inflation trends.
WASHINGTON – U.S. inflation eased last month as prices of gas, clothing and used cars fell, providing some relief to consumers, although much of the progress could be reversed if the Iran war continues to worsen.
The Labor Department said on July 14 that prices fell 0.4% in June compared with May, the largest monthly decline in four years.
On an annual basis, inflation eased to 3.5%, down from a year-on-year gain of 4.2% in May and lower than many economists had expected.
Yet oil prices jumped as the United States renewed attacks on Iran and President Donald Trump announced a new blockade in the Strait of Hormuz, a major shipping route for about a fifth of the world’s oil.
And many Americans are sour on the economy after five years of high inflation, posing a threat to Trump and Republicans in the upcoming midterm elections.
Simply: Inflation eased more than expected in June. US inflation was 3.5% (y/y) in June, down from 4.2% in May. This was the biggest one-month decline since April 2020 (!) with falling gas prices being the biggest reason for this.
“Core inflation” (except food and gas/energy) eased… pic.twitter.com/mMA9sEWESD
– Heather Long (@byHeatherLong) 14 July 2026
Excluding food and energy categories, core prices remained unchanged in June, a positive sign that underlying inflation is easing. On an annual basis, core prices rose 2.6%, down from 2.9% the previous month. Core inflation remains above the Fed’s 2% target.
Inflation-fighters at the Fed are sharply divided on next steps, according to minutes of the June 16-17 meeting. The minutes show that nearly half of policymakers support raising interest rates by the end of the year to curb borrowing, spending and price rises. The other half are willing to wait for signs that inflation may begin to fall again with falling gas prices, although these are minutes before the recent outbreak of violence in the Middle East.
