WASHINGTON (SourceRated) — U.S. inflation rose sharply in March, according to preliminary government data, as escalating tensions in the Middle East drove energy prices higher and complicated the Federal Reserve’s fight against persistent price pressures.
The Consumer Price Index (CPI) increased 0.4% month-over-month and 3.5% annually, exceeding economist forecasts. Core inflation, which excludes volatile food and energy prices, remained stubbornly elevated at 0.4% monthly and 3.8% annually.
“The Iran-Israel conflict has created a new inflationary shockwave,” said a Treasury official speaking on condition of anonymity. “We’re seeing secondary effects across transportation and manufacturing sectors.”
Energy prices jumped 5.1% in March, the largest monthly increase since Russia’s invasion of Ukraine in 2022. Gasoline prices surged 7.8%, while jet fuel costs spiked 12.3% — a development that could soon impact summer travel prices.
Market expectations for Federal Reserve rate cuts have shifted dramatically, with futures now pricing in just one quarter-point reduction by December. “The last mile of inflation fighting just got longer,” warned Goldman Sachs chief economist Jan Hatzius in a research note.