Consumer Prices Jump 0.9% in March as Gasoline Surge Pushes Inflation to 3.3%

WASHINGTON — U.S. consumer prices rose sharply in March as the war with Iran sent energy costs soaring, pushing the annual inflation rate to its highest level in nearly two years, the Labor Department reported Friday.

The consumer price index increased a seasonally adjusted 0.9% from February, lifting the 12-month rate to 3.3% from 2.4% the month before, according to the Bureau of Labor Statistics. Both figures matched economists’ expectations. The annual rate was the highest since April 2024.

Gasoline Drives the Increase

Energy prices jumped 10.9% during the month. Gasoline alone rose 21.2% and accounted for nearly three-quarters of the overall monthly increase, the bureau said. The conflict, which began at the end of February, disrupted oil shipments through the Strait of Hormuz and pushed crude prices above $100 a barrel.

Core Inflation Contained

Excluding volatile food and energy categories, so-called core prices rose just 0.2% for the month and 2.6% from a year earlier, each a tenth of a percentage point below forecasts. Prices for medical care, personal care, and used cars and trucks declined.

Services excluding energy rose 0.2% for the month and 3% from a year ago. Shelter costs, the largest component of the index, increased 0.3% for the month and 3% annually, matching the lowest annual pace since August 2021. Food prices were unchanged in March and up 2.7% from a year earlier, with grocery prices falling 0.2%.

Fed Expected to Look Through Spike

Energy prices have moderated somewhat in April following a ceasefire between the U.S. and Iran, which could allow Federal Reserve officials to focus on the underlying trend. Inflation has run above the central bank’s 2% target for five years.

“We believe the Fed will look through the energy-driven noise so long as these factors hold,” said Alexandra Wilson-Elizondo, global co-chief investment officer of multi-asset solutions at Goldman Sachs Asset Management. “Today’s number buys the Fed time, but the real test lies ahead.”

Markets had priced in little chance of an interest-rate cut for the rest of 2026, although Fed officials at their March meeting signaled a tilt toward an eventual quarter-point reduction, with timing highly uncertain. Stock futures were slightly higher and Treasury yields mixed after the release.

Household Pressures

The jump in prices adds to cost-of-living strains that have become a central issue in this year’s midterm elections. Higher fuel costs also tend to filter into transportation and shipping charges over time, which economists say could put upward pressure on other goods in the months ahead.

The consumer price index measures the average change over time in prices paid by urban consumers for a basket of goods and services.