US Inflation Slows in June as Energy Costs Ease, Though Iran Tensions Loom

United States consumer inflation cooled more than expected in June, according to government data released Tuesday, as energy costs fell during a temporary easing of the US Iran conflict earlier in the period.

The consumer price index rose 3.5 per cent on a year on year basis in June, down from a 4.2 per cent increase in May, marking a pullback from a three year high as falling energy costs more than offset modest increases in housing and food prices.

Economists had anticipated a larger 3.8 per cent reading, according to a survey conducted by Dow Jones Newswires and The Wall Street Journal, making the actual figure a notable downside surprise for markets.

However, with oil prices rising again amid renewed Middle East hostilities and President Donald Trump ordering a fresh blockade of Iranian ports, analysts caution that the inflation progress could prove short lived in coming months.

Federal Reserve Chairman Kevin Warsh told the House Financial Services Committee that policymakers have no tolerance for stubbornly high prices, as lawmakers continue pressing the central bank over its progress on lowering inflation.

The Fed’s preferred inflation gauge, the Personal Consumption Expenditures price index, is due for release on July 30, which will offer a fuller picture of whether June’s cooling trend can be sustained amid renewed geopolitical volatility.