Inflation cools to 3.5% in June, more than expected, as gas costs fall and prices ease

US inflation significantly eased in June 2026, with the annual rate cooling to 3.5%, a figure lower than economists had anticipated. This slowdown marked the first decline in five months, falling from 4.2% in May, and provided some relief to American consumers facing elevated prices.

The primary driver behind this moderation was a notable drop in energy costs, particularly a 9.7% decrease in gasoline prices from May to June. This decline in energy prices, influenced by a brief US-Iran ceasefire, more than offset increases in other categories like food and shelter. Core inflation, which excludes volatile food and energy components, also showed a positive trend, remaining unchanged monthly and decreasing to 2.6% annually from 2.9% in May.

Despite the positive June report, inflation still remains above the Federal Reserve's 2% target. The Federal Open Market Committee is expected to consider this inflation data alongside other economic indicators, including relatively steady job growth, at its upcoming meeting.