Soaring gasoline costs propelled the U.S. inflation rate to 3.3% in March, marking the quickest annual pace recorded in nearly two years, according to fresh figures released by the Bureau of Labor Statistics on Friday.
On a month-over-month basis, prices climbed by 0.9%, tripling the 0.3% rate observed in February, when the overall inflation figure stood at 2.4%, as detailed by the latest Consumer Price Index data.
Fuel prices, which surged by an unprecedented 21.2% over the month, accounted for nearly three-quarters of the total monthly increase.
Economists polled by FactSet had projected a monthly rise of 0.9% and an annual rate reaching 3.4%.
The repercussions of the war that commenced with Iran in late February swiftly halted headway against inflation and amplified long-standing worries about affordability.
The growth in American wages, which had been outpacing inflation by roughly one percentage point for almost three years, saw a sharp contraction in March. Considering inflation, the average hourly earnings advanced by a mere 0.3% in March, down from the 1.3% seen in February.
“Things are going to get substantially worse before any relief materializes,” noted Heather Long, Chief Economist at Navy Federal Credit Union, in an interview with CNN. “Even if the conflict with Iran concludes within a fortnight, and a deal is magically forged, inflation will continue to climb for several more months.”
Slow Price Increases
Prior to the report’s release, experts anticipated price hikes in sectors such as airfares, transportation expenditures, and even groceries. These increases were more moderate than anticipated, with food costs actually contracting by 0.2% in March.
Excluding the typically volatile categories of energy and food, the core CPI grew by 0.2% in March, matching the pace of the preceding month. Annually, this closely watched core inflation measure rose to 2.6%, up from 2.5% in February.
“We haven’t seen this translate through yet in either food or airfares—those are clearly going to jump—and in transportation costs,” Long added. “It’s only a matter of time.”
The ceasefire achieved earlier in the week eased some fears that the conflict might intensify abruptly or even conclude swiftly. However, uncertainty persists, as do the potential inflationary consequences.
Inflation is expected to accelerate in the forthcoming months as the war’s effects propagate beyond gasoline prices and permeate numerous frequently purchased goods and certain services.
Even preexisting the conflict, inflation was running higher than normal, bolstered by increased costs for tariff-related goods and still-robust, though slightly softer, consumer demand for services.
“The price shock effects from oil have both quick and slow-acting consequences, and some of those effects… haven’t appeared yet,” Tyler Shives, an Associate Professor of Economics and Data Analytics at the University of St. Thomas in St. Paul, Minnesota, told CNN.
“The positive takeaway is that with an oil shock like this, there’s no reason to suspect it’s reigniting a broad inflation surge,” he continued. “The negative aspect is that consumers should still prepare for higher costs across other baskets of goods.”
And the tariff-related inflation remains a factor. The oil price shock has simply layered on top of that.
“We’re almost forgetting about tariffs because everyone is obsessively watching gas, but this is a good reminder that part of the predicament here is that we are compounding on top of what was already rising,” stated Long, the Navy Federal Credit Union economist.
The cost of toys, a category highly reliant on imports, jumped 2.3% in March—the largest monthly gain in almost five years; tools and hardware advanced by 1.4%, signaling the biggest increase since October 2022; and auto maintenance expenses rose by 1.4%, the highest figure since September 2022.
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