Inflation has eased thanks to cheaper energy, but experts warn that renewed tensions between the United States and Iran could lead to a return to price increases.
U.S. consumer prices fell in June as concerns about the Strait of Hormuz in the global energy market temporarily eased and energy prices fell, led by lower gasoline prices.
Prices fell 0.4% on a monthly basis, according to the Department of Labor’s Bureau of Labor Statistics’ Consumer Price Index (CPI) released Tuesday.
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Energy prices led the decline, falling 5.7%, the biggest monthly decline since April 2020. Crude oil prices fell by 9.7% and gasoline prices by 9.5%.
According to the American Automobile Association (AAA), which tracks daily gasoline prices, the average price of a gallon of gasoline (3.78 liters) is $3.85, down from $4.07 at this time last month.
“President Trump has consistently said that once traffic in the Strait of Hormuz normalizes, oil prices, and by extension, overall inflation, will plummet like a rock,” White House Deputy Press Secretary Khush Desai said in a post on X.
Experts said the reprieve could be short-lived as the ceasefire between the United States and Iran collapsed following last week’s fighting in which a civilian tanker collided with Iran. Since then, the price has increased from $3.79, according to AAA data.
“June’s CPI is in the rearview mirror. The decline was real, but it reflects the price from a few weeks ago. With the new rally, oil is quickly back up, with WTI (West Texas Intermediate) above $80 today. It’s up to a national average of $3.81. $4 gas is a few days away and diesel is back to $5,” Patrick de Haan, head of petroleum analysis at GasBuddy, said in a post on X.
Al Jazeera followed up on its post on X by asking the White House about the rise in gas prices, but did not receive a response.
Similar declines were seen in other sectors. The cost of clothing fell 0.6% on a monthly basis, the cost of a used car or truck fell 0.2% and the cost of electricity fell 1%.
Food prices rose 0.2% from the previous month. Meat prices rose by 0.6%, and lettuce prices rose by 6.5%. Meanwhile, prices for fresh fruits and vegetables fell by 0.5%. Tomato prices fell by 10%.
Annual surge
Annual data tells a different story. Overall, the CPI rose 3.5%, following a 4.2% rise in May, the largest annual increase in more than three years.
Energy prices rose 15.7% year-on-year, and gasoline prices rose 27%. Shelter costs increased by 3%.
Food prices have increased by 3% compared to this time last year. Meat prices rose 7.4%, while fresh fruit and vegetables rose 5.3%.
The CPI report comes amid mounting pressure on the Federal Reserve under new leadership. Fed Chairman Kevin Warsh, who took over the Fed from Jerome Powell in May, said in prepared remarks to lawmakers that the central bank “will not tolerate persistently high inflation.”
CME FedWatch, which tracks potential monetary policy decisions, projects an 87.7% chance that interest rates will stay between 3.5% and 3.75%, with the remaining probability of a 25 basis point increase to 3.75% to 4% at the next policy meeting this month.
The US market was on an upward trend following consumer statistics. The Nasdaq rose 0.9%, followed by the S&P 500, which is up 0.5% since the market opened. The Dow Jones Industrial Average rose 0.1% in midday trading.
