WASHINGTON — The biggest monthly jump in gas prices in six decades has left a clear thumbprint on inflation, and it arrived right when the Federal Reserve was hoping the numbers would cooperate.
Consumer prices rose 3.3% in March from a year earlier, the Labor Department said Friday. That was a sharp step up from 2.4% in February and the largest yearly increase since May 2024. On a monthly basis, prices increased 0.9% from February, the biggest such gain in nearly four years. The report is the first inflation read to show the effects of the Iran war, and you can practically feel how it tightens the policy debate.
Stripping out the volatile categories, core prices rose 2.6% in March from a year earlier, up from 2.5% in February. But last month core prices rose only 0.2%, a modest pace that suggests the gas shock hasn’t fully ricocheted into a wide range of other prices—yet. It’s still early, though, and the sharp rise in energy costs is the kind of thing that can linger in the economy’s bloodstream.
Gas prices averaged $4.15 a gallon nationwide Friday, up from $2.98 the day before the war began, according to motor club AAA. Somewhere in all that math is a very human moment: standing at a pump, hearing the low buzz of the nozzle, smelling that hot fuel air, and realizing the numbers on the display never seem to pause. Higher gas costs drain money people would otherwise spend on other goods and services, and for many Americans there’s only so much they can do. Your commute depends on where you live, shop, and work. You can change habits, sure—but not overnight, and not completely.
That’s the big question now for both consumers and the broader economy: does this surge in oil and gas turn into a sustained, broader inflation shock, like what followed the pandemic in 2021-2022? Back then, inflation peaked at 9.1% in June 2022 as supply chains snarled and demand jumped from stimulus checks and the overall reopening of activity. This time, economists point out the job market and consumer spending look weaker, and there aren’t large government stimulus checks waiting in the wings.
The unemployment rate remains low, at 4.3%, but companies aren’t scrambling to hire the way they did when the economy came roaring out of the pandemic. Rapid pay increases and steadier income growth helped households absorb earlier disruptions, but analysts say the current setup isn’t comparable. Alan Detmeister, an economist at UBS, said the difference is that “we aren’t seeing anywhere near the strength of demand.” In 2021 and 2022, income growth “was increasing really strongly,” he added—something that, in his view, isn’t happening now. Misryoum newsroom reporting also indicates economists are looking to past oil shocks for clues, including 1990-91, when higher oil and gas prices tied to Iraq’s invasion of Kuwait helped contribute to a recession without triggering a similar inflation jump.
For the Federal Reserve, the report matters because it reshapes expectations that rate cuts were coming soon. Most officials are almost certain to support keeping the key interest rate unchanged in the coming months, around 3.6%, as they assess how the economy evolves. But the gas-driven rise in inflation is almost certain to continue for several months, and many Fed officials have said a rate hike may be needed if inflation doesn’t cool. Investors currently don’t expect cuts until late 2027. Higher gas prices also carry a risk on the growth side, since they can weigh on consumer spending, potentially leading to layoffs. The Fed would typically respond to a rise in unemployment by cutting rates to encourage spending—while it would raise rates to combat inflation. So the central bank is stuck in that uncomfortable middle.
Misryoum editorial desk notes that the inflation pressure could show up in other places too. Analysts say the higher cost of oil and gas will likely push up grocery prices, adding to strain for consumers who have already absorbed about a 25% jump in food costs since the pandemic. Nearly all groceries are shipped by diesel-fueled trucks, and diesel fuel prices have risen even more than regular gas. Still, analysts don’t expect food prices to accelerate for another month or two. And after all of this, it’s still not clear how far beyond energy the damage will spread—only that the debate is getting harder, faster, and more political, especially for the White House as rising costs stay front and center.
Trump sparks backlash for AI image likening him to Jesus
Artemis II reignites deep-space travel—and hopes for a lunar economy
Eric Swalwell’s Prominent Backers Retract Support After Assault Allegations