US Inflation Falls to 3.5% as Oil Surge Threatens Reversal
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- Bureau of Labor Statistics reported US inflation rose 3.5% year-over-year in June, down from 4.2% in May, driven by gasoline prices falling 9.7% during the month — though AAA said the national average had already climbed back to $3.86 a gallon from $3.79 a week earlier.
- Brent crude surged to $87 per barrel — nearly $10 in 24 hours — after US military strikes on Iran and President Donald Trump's declaration of a naval blockade on the Strait of Hormuz with a 20% charge on all cargo shipped through the waterway.
- Federal Reserve Chair Kevin Warsh, in remarks ahead of his first address to Congress, said the FOMC has "no tolerance to persistently elevated inflation" and held rates at 3.5%–3.75% at his June meeting.
- Christopher Waller warned that another hot core-inflation print would force the FOMC to "consider tightening monetary policy in the near term," even though core inflation held steady at 2.6% in June.
- Food inflation kept climbing even as energy prices fell 5.7% for the month — meat, poultry, fish, eggs, dairy, cereals all rose, and restaurant meals cost 3.7% more than a year ago.
- National Federation of Independent Business found more than a fifth of US small business owners now call inflation their "single most important" problem, the highest share in nearly two years.
Why it matters: With Brent crude up roughly $10 in a single trading day following Trump's Strait of Hormuz blockade and US strikes on Iran, the June inflation print's gas-driven relief is being reversed before the ink dries — forcing Warsh's Fed to choose between backing Trump's rate-cut demands or honoring his pledge of "no tolerance" for persistently elevated inflation while small businesses report their worst inflation pain in two years.
