US Inflation Cools to 3.5% in June, But Risks Loom

Inflation in the United States slowed more than expected in June, with the Consumer Price Index (CPI) rising 3.5% annually, down sharply from 4.2% in May and below the 3.7% forecast. The moderation was driven largely by a drop in energy prices, as a brief U.S.-Iran ceasefire helped lower gas prices. Core inflation, excluding food and energy, eased to 2.6%. However, analysts warn the relief may be temporary: the ceasefire has ended, Iran has closed the Strait of Hormuz, and the U.S. has reinstated a blockade, prompting fears of another energy price spike. Federal Reserve Chair Kevin Warsh, in his first congressional testimony, emphasized a "resolute commitment to restoring price stability" and kept the option of an interest rate hike on the table. While markets had hoped for a pause, Warsh stated the Fed has "no tolerance for persistently elevated inflation." The conflicting forces—cooling data but rising geopolitical risks—leave the economic outlook uncertain.

Key points:

• June CPI: 3.5% year-over-year, down from 4.2% in May Source: NPR
• Energy prices: Fell sharply in June but are rising again as Middle East tensions escalate Source: NPR
• Federal Reserve: Chair Warsh maintains hawkish stance, keeping rate hike option Source: SCMP