U.S. June CPI falls to 3.5% as oil prices rise on renewed US‑Iran tensions

The U.S. consumer‑price index (CPI) for June 2024 increased 3.5% year‑on‑year, down from 4.2% in May, and fell 0.4% on a monthly basis – the first monthly decline in six years. The slowdown was driven largely by a sharp drop in energy costs, with gasoline prices falling about 9‑10% and overall energy prices down 5.7% in June.

Economists had expected a 3.8% annual rise, so the data gave markets a brief reprieve and reduced expectations that the Federal Reserve would raise its policy rate in July. Fed officials, however, warned that inflation remains above the 2% target and that a future rate hike remains possible, especially if core inflation does not continue to ease.

At the same time, renewed tensions between the United States and Iran have pushed Brent crude above $86 a barrel and U.S. West Texas Intermediate over $80. The escalation in the Strait of Hormuz has revived concerns that higher oil prices could feed back into consumer prices, complicating the Fed’s outlook. The combination of a softer CPI reading and a volatile oil market is shaping expectations for monetary policy and broader economic conditions.