CPI inflation report March 2026:
A man shops for butter at a supermarket in Houston, Texas, on March 17, 2026.
Ronaldo Schemidt | AFP | Getty Images
Consumer prices rose in March as the Iran war pushed up energy costs and pushed the Fed further away from its inflation target, according to a Friday report from the Bureau of Labor Statistics. But underlying inflation was relatively moderate.
The consumer price index increased by a seasonally adjusted 0.9% for the month, pushing annual inflation to 3.3%, driven by a 10.9% increase in energy costs. Both figures were in line with the Dow Jones consensus. The annual rate was the highest since April 2024, up from 2.4% in February.
However, core prices excluding food and energy rose much less; just 0.2% for the month and 2.6% from a year ago; both were 0.1 point below estimates; This shows that underlying inflation is more limited. There were even outright declines in prices, as medical care, personal care, and used cars and trucks all fell during the month.
The Iran conflict was the story of the monthly inflation reading, accounting for nearly three-quarters of the headline price increase as gasoline rose 21.2%, according to the BLS.
Energy prices have slowed in April since a ceasefire between the United States and Iran that has provided a tenuous peace in the conflict that began in late February. Fed officials could then examine the March rally and focus more on the underlying path of inflation, which has remained above target for five years.
Markets were already pricing in a slim chance of a rate cut through the rest of 2026, but Fed officials indicated there was a trend toward a quarter-point cut at the March meeting and the timing was highly uncertain.
Traders had little initial reaction to the report, as stock futures were slightly higher and Treasury yields were mixed.
Policymakers in particular considered services prices as signals of underlying inflation, excluding tariff effects and war.
Excluding energy, services increased 0.2% for the month and were up 3% from a year ago. Similarly, the housing sector fell to its lowest level since August 2021, with a monthly increase of 0.3% and an annual increase of 3%.
Food prices remained unchanged during the month, rising 2.7% year-on-year; Food prices at home fell by 0.2%. New vehicle prices increased by only 0.1%.
There were some signs of the impact of tariffs and war: Airline fares rose 2.7%, while clothing rose 1%.
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