US consumer prices fell for the first time in four years in June amid cheaper gasoline and moderating rents, firmly putting disinflation back on track and drawing the Federal Reserve another step closer to cutting interest rates in September.

The second straight month of benign consumer price readings reported by the US Labour Department on Thursday should help to bolster confidence among officials at the US central bank that inflation is cooling after surging in the first quarter.

The report also showed a measure of underlying inflation posting the smallest increase since August 2021 on a monthly basis. Financial markets saw a very high probability of the Fed starting its easing cycle in September.

“Barring rogue price data in July, the Fed has a checkered flag to reduce rates in September,” said Brian Bethune, an economics professor at Boston College. “This guidance will be solidified at the July meeting.”

The consumer price index dipped 0.1 per cent last month, the first drop since May 2020, after being unchanged in May, the Labour Department’s Bureau of Labour Statistics said. The CPI was weighed down by a 3.8 per cent decline in gasoline prices, which followed a 3.6 per cent decrease in May. Shelter costs, which include rents, increased a moderate 0.2 per cent after advancing 0.4 per cent in May.

Food prices rose 0.2 per cent after edging up 0.1 per cent in May. Grocery store prices ticked up 0.1 per cent, with increases in dairy products, meat, fish and eggs offset by declines in the costs of fruits and vegetables as well as cereals.

In the 12 months through June, the CPI climbed 3.0 per cent, the smallest gain since June 2023. That followed a 3.3 per cent advance in May. Economists polled by Reuters had forecast the CPI ticking up 0.1 per cent and gaining 3.1 per cent year-on-year.