US Inflation Unexpectedly Slows to 3.5% Annual Rate in June

In June, US inflation unexpectedly slowed to an annual rate of 3.5%, according to the Labor Statistics Bureau's consumer price index (CPI) report released Tuesday. This was below economists' expectations of 3.8% and marked the sharpest monthly decline in over six years, largely due to a steep drop in energy prices providing temporary relief from the year's inflation surge. The CPI fell 0.4% seasonally adjusted in June, compared to the anticipated 0.2% decrease.

Core inflation, which excludes volatile food and energy prices, remained steady in June at 2.6% over the past 12 months, below the consensus forecast of 2.9%. Inflation had accelerated in May to 4.2% annually, driven by a spike in oil prices linked to the Iran conflict, reaching the highest level since April 2023.

June's employment data showed a slowdown, with only 57,000 new jobs added, missing forecasts of 110,000, and May's figures were revised down from 172,000 to 129,000. However, the unemployment rate improved slightly, dropping to 4.2%. In early July, the Federal Reserve, under new Chair Kevin Warsh, kept interest rates steady at 3.75%, in line with market expectations. The Federal Open Market Committee unanimously voted to maintain rates, while revising inflation forecasts upward, lowering growth and unemployment projections, and removing prior expectations of rate cuts this year, leaving the door open for possible rate hikes later on.