The Labor Department reported the U.S. Consumer Price Index (CPI) rose 3.5% year-over-year in June. This figure marks a deceleration from the 4.2% surge recorded in May.
The index fell 0.4% on a monthly basis. Economists had previously forecasted a smaller monthly decline of 0.1%. Core CPI, which excludes volatile food and energy prices, increased 2.6% from a year ago.
This cooling data may reduce pressure on the Federal Reserve to implement further interest rate hikes. Improved purchasing power could benefit the consumer discretionary sector. However, ongoing geopolitical conflict in the Middle East remains a risk to the economic outlook.