U.S. inflation decreased by 0.4% in June, for a seasonally adjusted total of 3.5% over the year, driven by rapidly falling energy costs, according to a new report released by the U.S. Bureau of Labor Statistics.
Inflation rose by 0.5% in May before declining 0.4% in June. The dramatic change is the largest one-month shift in prices since April 2020, BLS reported. The overall May inflation rate was 4.2%, showing a dramatic fall in June.
Heather Long, chief economist at Navy Federal, said the June inflation rate cooled “more than expected.” She attributed gas prices to the overall lower rate.
“This was the biggest one-month decline since April 2020,” Long said. “Falling gas prices were the biggest factor.”
Energy prices dropped by 5.7% in June after rising 3.9% in May, 3.8% in April and 10.9% in March, due to the U.S. conflict in Iran. A ceasefire announced in June appeared to slow market tensions in the energy industry.
Overall, energy prices have increasd by 15.7% over the last year, showing a volatile market since the U.S. conflict in Iran started. Gas prices rose by 26.7% over the last 12 month period as well.
The index for food and shelter also increased in June. Food prices rose by 0.2% and shelter prices rose by 0.1%.
Core inflation, which excludes prices for food and energy, eased to 2.6%, down from 2.9% in May.
Long warned that flaring tensions with Iran may mean the cooled inflation numbers are only temporary.
“The renewed war with Iran with almost certainly push inflation back up,” Long said. “This should give the Federal Reserve some time to wait and see for a while.”