Consumer prices in June pulled off their largest one-month nosedive since April 2020, which is great news for anyone who does not eat food, use a computer, or plan on buying gasoline next week.
As Trending Politics reported, the Consumer Price Index fell 0.4% from May, a bigger drop than economists expected, bringing the year-over-year rate down to 3.5%. The Bureau of Labor Statistics noted that "this decline in the all items index was the largest 1-month decrease since April 2020." Energy was the star of the show, with that index dropping 5.7% in June after the U.S. and Iran signed a memorandum of understanding that briefly calmed global oil markets. Apparel, used cars and trucks, and housing also pitched in to drag the headline number lower.
So naturally, everyone is celebrating. The White House pointed to the report as validation of President Trump's argument that more oil flowing through the Strait of Hormuz would cool prices. NEC Director Kevin Hassett called it "absolutely the best inflation report we've seen in about 6 years," noting that core inflation fell to 2.6% year over year, "which is just about where the Fed expects it to be."
But before you go throwing a parade, there are a few asterisks the size of billboards attached to this report.
First, food prices went up. Four of the six major grocery store food categories rose in June. Eating out got pricier too, with full service meals climbing 0.4%. So if your definition of "inflation relief" involves actually feeding yourself, the picture is less rosy.
Second, the energy drop that powered this whole report may already be ancient history. Oil prices have jumped roughly 15% this week alone thanks to fresh tensions in the Persian Gulf. Critical oil storage hubs are sitting at decades-low levels, and refilling them with hundreds of millions of barrels could push prices even higher. That is what we in the business call a "temporary victory."
Third, artificial intelligence is quietly becoming an inflation villain nobody asked for. Microsoft, Amazon, Google, and Meta are all scrambling to buy up memory and components for AI data centers, and the supply simply is not there. Apple raised prices on flagship products last month and said in a statement, "We have never seen a component price increase this much, this quickly." The computer software and accessories category jumped 2.3% in just one month and is up 17.4% from a year ago. Turns out training robots to think is expensive.
Core inflation, which strips out food and energy, was flat for the month. Better than going up, but not exactly a champagne-popping moment either.
Federal Reserve Chairman Kevin Warsh made it clear the Fed is not taking a victory lap. In testimony released alongside the report, Warsh said policymakers "have no tolerance for persistently elevated inflation" and share "a resolute commitment to restoring price stability." Translation: do not expect rate cuts anytime soon.
So June was a nice month. Enjoy the memory of it, because between food prices, an oil market that changes mood every 48 hours, and an AI arms race eating up every chip on the planet, this inflation fight has sequels lined up like a Marvel franchise.
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