Consumer prices have gone up 3 percent from a year ago and 0.2 percent between May and June, according to the consumer price index (CPI). 

The Labor Department’s new numbers from the index — which measures the cost of goods and services consumers spend money on in the U.S., from food to fuel to rent — come in slightly lower than economists had expected.

Here are five takeaways from the new report:

Smallest annual increase in over two years

The 3 percent annual increase seen in June is the smallest annual increase since March 2021, a potential signal that the country is seeing its inflation woes ease after it surged during the pandemic and amid widespread supply chain issues. 

Inflation peaked with an annual increase of 9.1 percent in June 2022, a few months after Russia invaded Ukraine and sparked global economic issues.  

Housing prices are driving inflation

Rent and housing costs contributed to more than 70 percent of the overall increase in inflation in the latest CPI. 

Shelter prices went up 0.4 percent monthly, the largest factor in the monthly increase for the index of all items besides food and fuel, and up 7.8 percent annually.

The index for rent went up 0.5 percent from the previous month, and the index for owners went up 0.4 percent in that same period. Housing costs are still high, though rent and home prices have stabilized or dropped in some places in recent months.

FILE - This is a new housing development in Middlesex Township, Pa., on Oct. 12, 2022. Among the roughly 63% of U.S. homes with a mortgage, average homeowner equity per borrower was $274,070 in the first quarter of 2023, down 1.9% from the same quarter last year, according to real estate data tracker CoreLogic. (AP Photo/Gene J. Puskar, File)
FILE – This is a new housing development in Middlesex Township, Pa., on Oct. 12, 2022. (AP Photo/Gene J. Puskar, File)

Energy prices down, food prices up

Energy prices are down 16.7 percent from last year, when oil and gas price spikes were spurred by the war in Ukraine. Gasoline is down 26.8 percent, while electricity is up 5.4 percent.

Food prices are up 5.7 percent from a year ago, but have fallen or stagnated each month since March. 

Excluding food and fuel, costs rose 4.8 percent

Without food and energy factored in, the CPI shows prices rose 4.8 percent from a year ago. 

The so-called core prices, which don’t include the more volatile costs of food and fuel, went up 0.2 percent monthly in June, the smallest one-month increase since August 2021. 

The Fed could still hike interest rates

The Federal Reserve has been tightening monetary policy for months in an effort to tamp down high inflation. In June, the Fed decided to keep interest rates unchanged for the first time since January 2022. 

“Holding the target range steady at this meeting allows the Committee to assess additional information and its implications for monetary policy,” the Federal Open Market Committee (FOMC) said in a statement.

The latest jobs report shows the economy added 209,000 jobs last month, with the unemployment rate dropping to 3.6 percent. Together with the latest CPI report, these indicators could signal a soft landing after long-standing high inflation. 

But the central banking system could still seek to raise interest rates again. Federal Reserve Chairman Jerome Powell said late last month that “nearly all” participants in the FOMC “expect that it will be appropriate to raise interest rates somewhat further by the end of the year.”

At the same time, the slowed growth could mean the end of rate hikes happens sooner.