Trump Achieves An Economy Recovery First

The June inflation report, released Tuesday morning, delivered a result few analysts expected. After several months in which inflation remained stubbornly above 3% on an annual basis, the Consumer Price Index fell by 0.4% in June. This was not simply a case of prices rising more slowly. Prices actually declined, marking the first monthly drop in the CPI since May 2020.

The shift from the previous month was especially dramatic. In May, the CPI increased by 0.5%. One month later, it fell by 0.4%, representing a swing of nearly a full percentage point. It was also the largest monthly decline since April 2020, when the CPI dropped by 0.8%.

Most of the June decrease came from falling energy prices. Those prices dropped sharply after Trump’s ceasefire with Iran took effect and some oil shipments resumed through the Strait of Hormuz. According to the Bureau of Labor Statistics, the energy index fell 5.7% in June after rising 3.9% in May, 3.8% in April, and 10.9% in March. Food prices, meanwhile, rose by 0.2%, a rate that is broadly consistent with the Federal Reserve’s longer-term inflation goal.

Core inflation also came in lower than expected. Core CPI excludes food and energy because those categories tend to be more volatile. The BLS reported that core prices were unchanged in June. One economic analysis suggested that the figure was technically negative, though the decline was small enough to round to 0.0%. Either way, the reading was a clear improvement from the 0.2% increase in May and the 0.4% increase in April.

Because food and energy prices can move sharply from one month to the next, many economists view core inflation as a better measure of underlying price pressures. That makes June’s flat or slightly negative reading encouraging. Still, one month is not enough to prove that inflation has been brought under control. The July report will help show whether June marked the beginning of a broader trend or merely a temporary pause.

Even after the monthly decline, inflation remains a serious concern for American households. June’s report lowered annual inflation from 4.2% to 3.5%, beating economists’ forecast of 3.8%. That is an improvement, but it does not erase the cumulative damage caused by several years of rising prices. Families are still paying far more for housing, food, transportation, and other necessities than they were before the inflation surge began.

Core inflation also declined on an annual basis, falling from 2.9% in May to 2.6% in June. That figure is moving in the right direction, but it remains well above the 2% target. Inflation may no longer feel as overwhelming as it did at its peak, but many households are still under considerable financial pressure. Headline inflation has not fallen below 2% since February 2021.