The spike in March CPI was attributed almost entirely to the gasoline prices, which jumped 21.2% following a mere 0.8% increase in February.
Consumer price inflation (CPI) jumped in March, reflecting the impact the U.S.-Iran war has had on energy prices, according to a report released Friday. The increase, however, was tamer than expected. Reacting to the report, stock futures remained slightly higher and bond prices climbed as yields fell, factoring in a dovish monetary policy environment.
Crunching the Numbers: The Bureau of Labor Statistics (BLS) reported that the CPI rose 0.9% month over month (MoM) in March. Economists, on average, expected a 1% increase in the index following a more modest 0.3% rise in February.
The year-over-year growth also accelerated to 3.3% from February’s 2.4%, while the consensus estimate called for a 3.4% increase.
The core reading, which strips off food and energy, increased 0.2% from the previous month and 2.6% from a year ago, compared with February’s 0.2% and 2.5%, respectively. The consensus estimates were at 0.3% and 2.7%, respectively.
Since the start of the conflict between the U.S. and Iran on Feb. 28, energy commodity prices have jumped. The average retail gasoline price in the U.S. has topped $4 a gallon for the first time since 2022.
Even with a two-week ceasefire in place since midweek, an uneasy calm persists, as Iran accuses the U.S. of breaching certain terms of the agreement. Meanwhile, the Strait of Hormuz remains largely restricted, with shipping traffic still heavily constrained, keeping supplies tight.
The March CPI report revealed that energy price growth accelerated to % from 0.6% in February, with gasoline prices jumping 21.2%. Among the other components:
- New vehicle prices: +0.1%
- Used car and truck prices: -0.4%
- Shelter prices: +0.3%
Read Across for Rates: The inflation reading will have ramifications for the Federal Reserve’s rate decision due following a two-day meeting scheduled for April 28-29. The minutes of the Fed’s March meeting released earlier this week showed that the vast majority of members felt the upside risks to inflation and downside risks to employment remained elevated. At the same time, most participants thought it was too early to assess the impact of the U.S.-Iran conflict on the U.S. economy, and therefore deemed it fit to “continue to monitor the situation and assess the implications for the appropriate stance of monetary policy.”
Many participants pointed to the “risk of inflation remaining elevated for longer than expected amid a persistent increase in oil prices.”