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June’s Consumer Price Index fell 0.4% as a 23% drop in WTI crude oil prices combined with unusually broad-based cooling in core inflation and encouraging producer price data to dampen 2026 rate-hike expectations, leaving futures markets pricing the Federal Open Market Committee on hold in July with a roughly two-thirds chance of a September hike.

What caught our eyes this week

All around a great inflation report

As expected, June’s 23% fall in WTI crude oil prices was a notable drag for monthly CPI inflation, but the most interesting drivers of June’s -0.4% print came from other areas. Core inflation (which excludes food and energy) was flat on the month for the first time in over five years. Drivers of this cooling were broad-based. Core goods prices fell slightly for the second straight month. Shelter inflation also slowed meaningfully to +0.1% on the month. Perhaps most surprisingly, prices for other services besides shelter also fell in the aggregate for only the eighth time in the last 10 years. This report was followed by encouraging data from producer prices, where the broader fallout from the war in Iran is still being felt (for example, in elevated transportation and warehousing costs) but is still moving in the right direction. Taken together, these two reports dampened expectations for rate hikes in 2026. Federal funds futures markets now see the Federal Open Market Committee on hold for July before a roughly two-thirds chance of a rate hike in September.

Graph showing headline versus core CPI month-over-month percent change from July 2025 to June 2026

CHART OF THE WEEK: Cerity Partners, FactSet

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