U.S. June CPI slows to 3.5% as gasoline prices fall

2026-07-14

U.S. June CPI slows to 3.5%

The U.S. Labor Department said on the 14th that the June consumer price index (CPI) rose 3.5% from a year earlier. The increase narrowed from 4.2% in May and also came in below market expectations of 3.8% to 3.9%. The main factor was lower gasoline prices, reflecting hopes for an end to the military conflict between the United States and Iran.

Gasoline decline weighs

On a seasonally adjusted month-on-month basis, the index fell 0.4%, the first decline from the previous month in two years since June 2024. The core index, which excludes energy and food, rose 2.6% from a year earlier, slowing from 2.9% in May. According to the American Automobile Association (AAA), the national average price of regular gasoline climbed to the mid-$4.50s per gallon in May before falling on expectations of a ceasefire in the Middle East, and dropped to the mid-$3.70s in early July.

AI investment and geopolitical risk

The artificial intelligence (AI) boom is driving up prices in information and communications-related areas such as software. Software prices are 17.4% higher than a year earlier. The increase in data center construction and tight supply and demand for advanced semiconductors are behind it. CPI growth remains high, and gasoline prices a year ago were in the low $3.10s. AI-related investment is expected to stay at elevated levels for now, and price pass-through from higher costs tied to turmoil in the Middle East could also spread.

FRB watches for renewed inflation

Federal Reserve Chairman Worsh said on the 1st that 'inflation risks have fallen' in recent weeks. However, the confrontation between the United States and Iran over the Strait of Hormuz has since intensified, and crude oil prices are rising again. In 'FedWatch', which forecasts policy based on moves in U.S. interest rate futures, expectations for a rate hike by year-end account for nearly 90%, and inflation concerns are once again strengthening in the near term.

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