With new rounds of bombing resurrecting the war in Iran, gas prices have started inching upward.
But they fell enough in June to bring about a cooling of the U.S. inflation rate.
According to statistics released Tuesday by the Labor Department, the consumer price index rose 3.5% in the 12 months ending in June. That’s down from 4.2% in May, which had marked the fastest pace in three years.
On a monthly basis, prices fell 0.4%, driven largely by a 10% drop in gasoline prices after a mid-June agreement extending a tentative ceasefire between the United States and Iran calmed oil markets, according to a report from The Washington Post.
The Post report also notes that economists think that inflation could take two years or more to return to 2%, the level the Federal Reserve considers consistent with stable prices.
“That’s assuming we don’t get more shocks,” Alan Detmeister, an economist at UBS, told The Post, referring to such disruptions as new tariffs, spikes in energy prices or fresh geopolitical conflicts.
Forces pushing up inflation are multiplying rather than fading. Tariffs are still impacting supply chains, with many firms telling the New York Fed that they plan additional price increases in the months ahead, according to The Post. And a boom in artificial-intelligence infrastructure is driving up the cost of electronic components and electricity.
Some Fed officials have signaled frustration with consecutive months of rising inflation and warned that stubborn readings of core inflation, which strip out volatile food and energy prices, could push the central bank toward raising interest rates. After cutting rates three times last year, the Fed has left them unchanged in 2026.
“If we get another hot reading on core inflation this week, then the FOMC will need to consider tightening monetary policy in the near term,” Fed governor Christopher Waller said Monday, referring to the Federal Open Market Committee.
