The U.S. Labor Department reported Tuesday that annual inflation fell to 3.5% in June, a decrease from the 4.2% rate recorded in May. The Consumer Price Index (CPI) showed that overall prices declined by 0.4% during the month, driven primarily by a reduction in energy costs. According to AAA, gasoline prices at the end of June were 71 cents lower per gallon than their peak in May.
The decline in energy costs followed a tentative ceasefire between the United States and Iran. However, that agreement concluded this month, leading to a resumption of military activity. Iran has claimed the Strait of Hormuz is closed, and the U.S. military has announced plans to reinstate a blockade of Iranian vessels. Furthermore, President Trump stated Monday that he intends to implement a 20% toll on cargo passing through the strait.
Federal Reserve Chair Kevin Warsh began two days of congressional testimony on Tuesday. Market analysts are monitoring his statements for indications regarding potential interest rate adjustments before the end of the year. While "core" inflation—which excludes volatile food and energy sectors—dropped to 2.6% in June, analysts from GasBuddy suggested that July data may reflect rising crude oil prices resulting from the renewed regional tensions.