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U.S. inflation eased more than expected in June amid retreat in energy prices

ICICIdirect Research 15 Jul 2026 DISCLAIMER

News: U.S. inflation eased more than expected in June amid retreat in energy prices. CPI on YoY basis rose 3.5% in the 12 months through June after rising 4.2% in May. On MoM basis CPI fell to 0.4% in June after increasing 0.5% in May. The index for energy fell 5.7% in June after rising 3.9% in May, 3.8% in April, and 10.9% in March. Gasoline prices declined 9.7% over the month but were up 26.7% from a year ago. Core-CPI which excludes energy and food rose 2.6% in June following 2.9% increase in May. On MoM basis Core CPI remained unchanged in June after gaining 0.2% in May. Indexes that decreased over the month include motor vehicle insurance, communication, apparel, medical care, and used cars and trucks. Shelter prices, which comprise about one-third of the CPI weight, rose by 0.1% in June and were up 3.3% from a year ago. Services less energy services index rose to 3.2% in June. The energy index increased by 15.7% for the 12 months ending June, and the food index increased 3.0% over the last year. US Dollar and treasury yields fell after inflation fears eased on mild U.S. CPI. Further, US President Donald Trump canceled the plan to charge a fee on ships crossing the Strait of Hormuz. Treasury 10-year yield slipped to 4.587%, While 2-year treasury yield, which typically moves in step with interest rate expectations declined to 4.191%

View: We expect US Federal Reserve to keep its interest rate untouched at upcoming meeting as well. Fed will wait and watch for more data before taking any further decision on monetary policy. However, the concerns over oil prices have increased after a collapse in Iran ceasefire. Additionally, in congressional testimony Fed Chair Warsh said that cooler June inflation doesn’t mean the Fed can rest easy. Moderation in June number does not look sufficient to convince market participants that interest rate hike this year is off the table. There are also concerns that prices may accelerate again in next reports as rising hostilities in Middle east may keep energy and fuel prices at elevated level and this increase may even bleed into core prices

Impact: Neutral

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