US consumer inflation cooled more than expected in June, US government data showed on Tuesday, as energy costs fell on a temporary easing of the US-Iran war.

However, with oil prices again rising on the renewal of Middle East hostilities, and US President Donald Trump ordering the restart of a blockade of Iranian ports, the progress could be fleeting.

The consumer price index (CPI) rose by 3.5 percent on a year-on-year basis in June, down from a 4.2 percent increase in May, according to US Labour Department data.

The figure marked a pull-back from a three-year high, as a drop in energy costs more than offset upticks in housing and food prices.

Analysts had anticipated a larger 3.8 percent CPI, according to economists surveyed by Dow Jones Newswires and The Wall Street Journal.

Steeper costs have squeezed household budgets, piling pressure on the Trump administration ahead of midterm elections this year.

All eyes are now on Federal Reserve Chairman Kevin Warsh, who vowed on Tuesday that the independent central bank will rid the United States of a years-long "inflation surge."

He stressed to the House Financial Services Committee in a hearing that policymakers have "no tolerance" for stubbornly high prices.

US lawmakers questioned Warsh over progress on lowering inflation, among other issues, as markets watch for hints that the Fed may lift interest rates later this year – despite Trump's insistent pressure for cuts.

While the central bank has a longer run inflation target of 2.0 percent, cost hikes have been higher than that level for around five years.

Asked on Tuesday if he would act according to Trump's wishes or signals from economic data, Warsh said: "My commitment to you is to follow the law and follow the data, follow our very best judgement."

"If we get policy right – and I can assure you we will – the inflation surge of the last five years will be a thing of the past," Warsh added in opening remarks.

The Fed is also monitoring the effects of AI investments on inflation and the jobs market, he said.

Excluding the volatile food and energy sectors, "core" CPI was up by 2.6 percent year-on-year in June, also below May's reading.

Overall CPI fell by 0.4 percent between May and June, the first month-on-month decline since 2020.

White House economic advisor Kevin Hassett told Fox News that Tuesday's report was "absolutely the best inflation report we've seen in about six years."

He downplayed expected disruptions from the Middle East conflict, saying that the path towards lower US petrol prices merely faced "a hiccup" because of Tehran.

A lower reading of underlying inflation "gives the Fed breathing room in deciding whether and when to raise interest rates," said Nationwide chief economist Kathy Bostjancic in a note.

But she warned that the sharp reversal in oil and petrol prices "will keep odds for a rate hike in the coming months high."

For now, June's data have not shown inflation broadening out across goods and services, a concern held by central bankers, said economist Bernard Yaros of Oxford Economics.

Besides oil prices, effects from Trump's tariffs "were not discernible" while price pressures linked to the artificial intelligence build-out were less evident than expected, he said.

US petrol costs plunged by 9.7 percent in June on a month-on-month basis – though still higher than a year ago.

Energy prices rocketed this year after the US and Israel launched strikes on Iran in late February, triggering Tehran's retaliation in virtually blocking off the Strait of Hormuz, a key waterway for global energy transit.

While energy costs slumped in June, the cost of food climbed by 0.2 percent on a monthly basis.

The Fed's preferred inflation gauge, the Personal Consumption Expenditures (CPE) price index, is due to be released July 30. (AFP)



Edited by Robert Kemp