San Francisco Frontiers - US inflation cools in June before renewed Mideast fighting

However, with oil prices rising on the recent renewal of Middle East hostilities, 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, according to Labor Department data.

The figure marked a pullback from a three-year high, as a drop in energy costs more than offset upticks in housing and food prices.

Analysts had anticipated a larger 3.8 percent CPI, according to economists surveyed by Dow Jones Newswires and The Wall Street Journal.

All eyes are now on Federal Reserve Chairman Kevin Warsh as he appears 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, while markets watch for hints that the Fed may lift interest rates later this year -- despite Trump's insistent pressure for cuts.

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.

- Resisting rate hikes? -

Warsh vowed in opening remarks Tuesday that the central bank will rid the United States of the years-long "inflation surge."

"At the Fed, our number one objective is getting monetary policy right," he said. "If we get policy right -- and I can assure you we will -- the inflation surge of the last five years will be a thing of the past."

Excluding the volatile food and energy sectors, "core" CPI was up by 2.6 percent year-on-year in June, also below May's reading.

Overall CPI fell by 0.4 percent between May and June, the first month-on-month decline since 2020.

White House economic advisor Kevin Hassett told Fox News that Tuesday's report was "absolutely the best inflation report we've seen in about six years."

A lower reading of underlying inflation "gives the Fed breathing room in deciding whether and when to raise interest rates," said Nationwide chief economist Kathy Bostjancic in a note.

But she warned that the sharp reversal in oil and gasoline prices "will keep odds for a rate hike in the coming months high."

For now, June's data have not shown inflation broadening out across goods and services, a concern held by central bankers, said economist Bernard Yaros of Oxford Economics.

Besides oil prices, effects from Trump's tariffs "were not discernible" while price pressures linked to the artificial intelligence buildout were less evident than expected, he said.

US gasoline costs plunged by 9.7 percent in June on a month-on-month basis -- though still higher than a year ago.

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.

The Fed's preferred inflation gauge, the Personal Consumption Expenditures (CPE) price index, is due to be released July 30.

F.Young--SFF