Washington (United States) (AFP) – US consumer inflation cooled more than expected in June, government data showed Tuesday, as energy prices fell on a temporary cooling of the US-Iran war. With the recent renewal of hostilities between Washington and Tehran, and US President Donald Trump ordering the restart of a blockade of Iranian ports, the progress could be fleeting.
The consumer price index (CPI) rose by 3.5 percent on a year-on-year basis in June, down from a 4.2 percent increase in May, said the Labor Department. The figure marked a pullback from a three-year high, as a drop in energy costs more than offset upticks in housing and food. Analysts had anticipated a larger 3.8 percent CPI uptick, according to economists surveyed by Dow Jones Newswires and The Wall Street Journal. Yet, the cooldown is unlikely to fully ease worries over costs.
A return of fighting this month, and Trump’s declaration that a ceasefire was over in the Middle East, have been pushing oil prices upwards again. All eyes will turn to Federal Reserve Chairman Kevin Warsh at 10:00 am (1400 GMT), when he is due to appear before the House Financial Services Committee following his first interest rate meeting at the helm of the central bank. US lawmakers are expected to grill him over progress on lowering inflation in the world’s biggest economy, among other issues.
While the central bank has a longer run inflation target of 2.0 percent, cost hikes have been higher than that level for around five years. Warsh, in prepared remarks released Tuesday, is set to vow that the central bank will rid the United States of the years-long “inflation surge.” “The Fed’s number one objective is to get monetary policy right — or as near to it as we possibly can,” he says in his prepared remarks. “If we get policy right — and we will — the inflation surge of the last five years will be a thing of the past,” he adds.
For now, US gasoline costs plunged by 9.7 percent in June on a month-on-month basis — though they still remain higher than a year ago. CPI fell by 0.4 percent between May and June too, in the first month-on-month decline since 2020. Energy prices rocketed this year after US-Israeli strikes targeting Iran from late February triggered Tehran’s retaliation in virtually blocking off the Strait of Hormuz. The strait is a key waterway for global energy transit.
While energy costs slumped in June, the cost of food climbed by 0.2 percent on a monthly basis. Excluding the volatile food and energy sectors, overall CPI was up by 2.6 percent year-on-year. The Fed’s preferred inflation gauge, the Personal Consumption Expenditures (CPE) price index, is due to be released July 30.
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