June CPI Falls 0.4%, Annual Rate Slips to 3.5%

The June consumer price index fell 0.4% from May, the Bureau of Labor Statistics reported. The annual inflation rate dropped from 4.2% to 3.5%.

The decline was concentrated in energy. Gasoline prices, which are closely tied to crude oil, fell 9.5% month-over-month. Electricity prices also declined.

The annual rate remains above the Federal Reserve's 2% target. The central bank meets later this month. Policymakers have said they need to see inflation moving consistently toward 2% before considering rate cuts.

The June data follows a string of hotter-than-expected readings earlier this year. The drop in gasoline may provide some relief. Other components of the index could keep inflation elevated.

The Federal Reserve's next policy decision is scheduled for July 26.