US CPI Surges 0.9% in Largest Monthly Jump Since 2022 on Gas

Jennifer Lee, Senior Economist at BMO Capital Markets, breaks down the March CPI data and what it means for the Fed's path forward.

US inflation surged in March by the most in nearly four years as the war with Iran sent gasoline prices skyrocketing.

The consumer price index rose 0.9% from February, according to data out Friday. From a year ago, it picked up to 3.3%, the strongest pace since 2024.

A record increase in gas prices was responsible for nearly three-quarters of the monthly advance, the Bureau of Labor Statistics said. Another measure that excludes food and energy costs increased at a slower 0.2% pace.

The data underscore how the war in the Middle East is beginning to ripple through the US economy, worsening the affordability woes many households have faced in recent years. Americans are already experiencing higher prices at the pump, and service providers including Delta Air Lines Inc. and the US Postal Service have warned of price hikes ahead.

Even if the US-Iran truce holds and there’s a rapid resolution to the conflict, economists anticipate higher costs are likely to persist in the near term as oil output normalizes. Beyond the energy shock, a disruption in the supply of fertilizer is expected to eventually lead to higher grocery bills, while rising transportation costs could impact all kinds of consumer goods.

“Looking ahead, we expect a similarly sized rise in headline CPI in April,” Kathy Bostjancic, the chief economist at Nationwide, said in a note after the release. “Even if a long-lasting deal to end the war is reached and the Strait of Hormuz is fully re-opened, it would take months for oil, gasoline, diesel and other commodity supplies to snap back to pre-war levels.”

The S&P 500 index opened higher, and the dollar fell. “Comments show that many consumers blame the Iran conflict for unfavorable changes to the economy,” Joanne Hsu, director of the survey, said in a statement. “Economic expectations will likely improve after consumers gain confidence that the supply disruptions stemming from the Iran conflict have ended and gas prices have moderated.”

While a temporary ceasefire between the US and Iran is in place, it’s tenuous and oil flows from the Middle East remain disrupted. Even if a broader peace deal is reached, analysts have cautioned global shipping and energy markets could take months to normalize.

Economists expect fuel and fertilizer costs to filter through to the consumer in the months ahead, including higher grocery bills.

Read More: US CPI Surges 0.9% in Largest Monthly Jump Since 2022 on Gas

Separate data out Friday illustrated the initial impact of the conflict. The consumer price index rose 0.9% in March, the biggest increase in nearly four years, reflecting a record increase in gasoline prices.

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