US consumer prices surge as expected in March
US consumer prices increased the most in nearly four years in March as the war with Iran increased oil prices and pass-through from tariffs continued and the possibility of an interest rate cut further decreased.
Consumer Price Index increased by 0.9 percent in March Department of Labor Bureau of Labor Statistics In the statement made on Friday, it was stated that the largest increase has occurred since June 2022, when prices rose in response to the Russia-Ukraine war.
Consumer prices increased by 0.3 percent in February.
In the 12 months until March, CPI increased by 3.3 percent, following the 2.4 percent increase in February.
Economists participating in the Reuters survey predicted that the CPI would increase by 0.9 percent and 3.3 percent on an annual basis.
The jump in consumer inflation followed a sharp recovery in employment growth in March; This showed that the labor market remained stable.
But there are concerns that a prolonged conflict in the Middle East could damage the labor market, especially if households respond to higher prices by pulling back on spending.
The US-Israeli war with Iran has led to global crude oil prices rising by more than 30 percent; The national average retail gasoline price rose above $4 per gallon for the first time in more than three years.
The ceasefire appeared fragile, although President Donald Trump on Tuesday announced a two-week ceasefire on the condition that Tehran reopens the Strait of Hormuz.
The increase in March showed only the immediate effects of the oil price shock, which also increased diesel prices.
The increase in March underlined the affordability challenges facing consumers.
Trump achieved victory in the 2024 presidential election by promising to lower prices.
Excluding volatile food and energy components, CPI increased by 0.2 percent in March after rising 0.2 percent in February.
Both core CPI and personal consumption inflation are driven by businesses passing on some of Trump’s broad tariffs to consumers.
Economists expect the conflict in the Middle East in the coming months to drive up core prices through expensive jet fuel, which will increase airline fares, and diesel, which will increase the cost of goods transported by road.
Prices of fertilizers and plastics, among other goods, are also expected to rise.
Rising inflation has led some economists to believe the Fed will not cut borrowing costs in 2026; This belief was strengthened by the minutes of the central bank’s March 17-18 policy meeting, released on Wednesday; This showed in March that a growing group of policymakers felt interest rate hikes might be necessary.
The Fed left the overnight benchmark interest rate in the range of 3.50-3.75 percent.
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