Global Inflation Cools to 4.2% as Energy Costs Ease

Headline inflation across advanced economies fell for a third straight month as oil retreated below $80 a barrel.

Written by Maya Sundar · Markets EditorUpdated Jun 25, 2026 Fact-checked · 4 min read

Consumer-price inflation across the OECD eased to 4.2% in May, down from a peak above 9% two years ago, as falling energy prices fed through to households. Core inflation, which strips out food and fuel, remains stickier at 3.5%.

Energy was the single biggest driver of the slowdown. With crude trading below $80 a barrel, fuel and electricity costs that drove the 2024 spike have largely reversed, dragging headline rates lower across Europe and North America.

Core inflation is the harder problem

Stripped of volatile food and fuel, underlying price pressure has proven far more persistent. Services inflation — driven by wages and housing — is cooling only gradually, which is why most central banks remain cautious about declaring victory.

Policymakers are watching three signals closely:

Wage growth, which is still running ahead of the pre-pandemic norm
Rents and shelter costs, the slowest-moving component of every CPI basket
Inflation expectations, which anchor how firms set prices and workers bargain

What it means for rates

A sustained move toward the 2% target would give central banks room to begin cutting policy rates later this year. But with core inflation above target, officials have signalled they would rather hold for longer than risk a second wave.

Figures reflect the latest OECD and national statistics releases aggregated on this platform.

Written by Maya Sundar, Markets Editor. Figures are aggregated from official sources on ECONOMY and may be revised. Information only — not financial advice.