Inflation Rose Less Than Expected In June As Energy Prices Eased. New Clashes With Iran Could Jeopardize The Trend

Inflation rose below expectations in June as energy prices eased. However, they have been rising over the past days as tensions between the U.S. and Iran rise again.

Concretely, consumer prices rose 3.5%, compared to analysts’ expectations of 3.8%. CNBC noted that prices saw their biggest decline in more than six years as energy prices dropped.

The seasonably-adjusted consumer price index fell 0.4%, when analysts expected it to be 0.2%. Core inflation, which excludes more volatile components including energy, was flat on the month, the rate standing at 2.6%. Analysts expected it to rise 0.2% and for the rate to stand at 2.9%.

On Monday, Federal Reserve Governor Christopher Waller said that the U.S. central bank should avoid overreacting to inflation based on the mistakes of the past, while making clear that interest rate increases remain on the table if price pressures fail to ease.

Speaking at the New York Association for Business Economics, Waller urged policymakers to take a measured approach as they assess whether inflation is becoming entrenched again.

While he acknowledged that the Federal Reserve made the mistake of “not responding sooner to the high inflation we observed” in 2021, he warned against making the opposite mistake by tightening monetary policy too quickly this time.

“The desire to avoid past mistakes is often the author of new ones,” Waller said in prepared remarks. The comments come at a critical moment for financial markets, with investors closely watching whether persistent inflation will force the Fed to resume raising interest rates after months of holding policy steady.

Waller argued that today’s inflation looks different from the post-pandemic surge that prompted the Fed’s aggressive tightening cycle. Instead of being driven primarily by supply chain disruptions or temporary energy shocks, he said current price pressures reflect a broader mix of forces.

Despite the drop, energy prices could go back to putting pressure on prices as tensions between the U.S. and Iran rise again. President Donald Trump said that the U.S. will collect revenue from protecting ships passing through the Strait of Hormuz and is imposing a blockade of Iranian ports.

Speaking to Fox News’ Fox and Friends, the president criticized Tehran, accusing it of breaking agreements between the countries to cease hostilities. “We had a deal. it was a done deal. and then they broke it. they always break it.”

He went on to claim that the U.S. is going to “keep the strait” and “probably run it.”

“We will become the guardian of the strait, and we should be reimbursed for that,” Trump added, saying that the U.S. “we can’t be expected to do that for nothing like we have for many years.”

“Wow we’re going to guard it and we’re going to get paid for guarding it, a lot of money,” Trump claimed.

Brent crude, the international benchmark, went back above $87 a barrel on Tuesday, while West Texas Intermediate, climbed over $80 a barrel.