US Inflation Cools Sharply in June as Energy Prices Retreat

US inflation cooled more than expected in June, offering temporary relief after a springtime surge tied to the conflict in the Middle East. The consumer price index fell 0.4% on a seasonally adjusted basis for the month, its steepest one-month decline since April 2020, according to the Bureau of Labor Statistics. That pulled the annual inflation rate down to 3.5% from 4.2% in May, the first slowdown in five months and below the 3.8% economists had expected. The drop was driven largely by a retreat in energy and gasoline prices after a ceasefire eased pressure on oil supplies. Core inflation, which strips out food and energy and is closely watched by the Federal Reserve, was flat on the month, leaving the annual rate at 2.6%, also softer than forecast. Services prices, a key gauge of underlying pressure, moderated notably. The report cooled expectations of a near-term Fed rate increase, with traders trimming the odds of a September hike, though some officials continue to warn that price risks remain elevated if energy costs rebound.