Inflation just did something it hasn’t done in a while: cooperate. The Bureau of Labor Statistics reported that the Consumer Price Index for June 2026 fell 0.4% month-over-month, bringing the year-over-year figure down to 3.5%. That’s a meaningful drop from May’s 4.2% reading and came in well below the 3.8% that economists had penciled in.
Markets responded the way markets do when the Fed’s favorite boogeyman starts shrinking. The S&P 500 and Nasdaq 100 both climbed by up to 0.5%, bonds rallied, and the probability of another rate hike from the Federal Reserve fell off a cliff.
What drove the cooldown
The hero of this inflation print was energy. Fuel costs plunged 5.7% in a single month, a decline largely tied to a ceasefire in the Middle East that loosened supply constraints that had been squeezing global oil markets for months.
Core CPI, which strips out volatile food and energy prices to get a cleaner read on underlying inflation, eased to an annual rate of 2.6%. That number matters more to the Fed than the headline figure, and it’s now moving in the right direction.
