The US consumer price index rose 3.3% year over year in March, the Bureau of Labor Statistics reported on Friday. That is the highest annual rate since May 2024 and nearly double February’s 2.4% reading.
Why it matters: the jump makes a Federal Reserve rate cut at the April meeting virtually impossible and signals that the Iran conflict is feeding directly into American household budgets.
What drove the surge
Energy costs were the primary culprit. Monthly consumer prices rose 0.9%, the steepest one-month increase since June 2022, following a 0.3% gain in February. Petrol prices spiked as the Iran war disrupted shipping through the Strait of Hormuz and rattled global oil markets.
The Iran-linked energy shock compounded the continued pass-through of tariffs into consumer goods. Food prices also edged higher, squeezing lower-income households hardest.
Core inflation crept up too
Core CPI, which excludes volatile food and energy, climbed to 2.7% year over year, up from 2.5% in both January and February. On a monthly basis, core prices rose 0.3%, compared with 0.2% the prior month.
The uptick in core inflation suggests that price pressures are broadening beyond the energy sector alone. Shelter costs and services both contributed to the acceleration.
What happens next
The CME FedWatch tool shows a 99.5% probability the Fed will hold rates steady at its current 3.5% to 3.75% range at the April meeting. Markets had been pricing in a possible summer rate cut, but March’s data pushes that timeline further out.
Federal Reserve Vice Chair Philip Jefferson said earlier this week that the economy continues to grow, led by consumer spending and business investment. But Friday’s inflation print tests that optimism.