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Published : 11 Apr 2026, 09:38 AM
US consumer prices increased by the most in nearly four years in March as the war with Iran led to a record surge in the cost of gasoline and diesel, dealing a blow to President Donald Trump whose approval ratings have been falling because of unhappiness over his handling of the economy.
Though the Consumer Price Index report from the Labor Department on Friday showed an underlying measure of inflation that excludes the volatile food and energy components rising moderately last month, economists said that was because March's data only captured the initial effects of the oil price shock, with second-round effects expected in the months ahead.
Economists also noted that the so-called core CPI was restrained by what they called an abnormal decline in used cars and trucks prices as well as health insurance.
As such, they said the benign core inflation readings would offer no comfort to officials at the Federal Reserve.
They still believed the US central bank would most likely not cut interest rates this year.
The report followed in the wake of a sharp rebound in job growth in March, which pointed to labor market stability.
"The economy has just taken a direct inflation hit as a result of the war in the Middle East," said Christopher Rupkey, chief economist at FWDBONDS.
"Economists say once the inflation genie is out of the bottle, it is nearly impossible to cancel the price increases and return costs back down to where they were. Time will tell if fed-up consumers go on strike."
The Consumer Price Index jumped 0.9 percent last month, the Labor Department's Bureau of Labor Statistics said, the largest increase since June 2022, when prices soared in response to the Russia-Ukraine war.
Consumer prices rose 0.3 percent in February. Last month's increase was in line with economists' expectations.
A 21.2 percent jump in gasoline prices, the largest since the government started consistently tracking the series in 1967, accounted for nearly three quarters of the monthly increase in the CPI.
Other motor fuels, which include diesel, also soared by a record 30.8 percent.
The US-Israeli war with Iran has sent global crude oil prices surging more than 30 percent, with the national average retail gasoline price breaking above $4 a gallon for the first time in more than three years.
Though Trump on Tuesday announced a two-week ceasefire on the condition that Tehran reopen the Strait of Hormuz, the truce appeared fragile.
In the 12 months through March, the CPI advanced 3.3 percent after rising 2.4 percent in February. The surge underscored the affordability challenges facing consumers and the escalating political risk for Trump, who rode to victory in the 2024 presidential election promising to lower prices.
Americans' views on Trump have soured significantly over his stewardship of the economy and the cost of living, and his approval rating is the lowest since he returned to the White House, at a moment when Republicans are gearing up to defend their congressional majorities in this fall's midterm elections.
The White House on Friday sought to shift focus from gasoline prices, posting on social media that "prices of eggs, beef, prescription drugs, dairy and other household essentials are falling or remain stable thanks to President Trump's policies."
The gloomy mood was captured by the University of Michigan's Surveys of Consumers showing its Consumer Sentiment Index plunged to a record low this month amid expectations that the Iran war would fuel inflation.
"While a ceasefire may limit further escalation, energy markets tend to exhibit the 'rockets and feathers' dynamic; prices spike quickly but decline gradually," said Sung Won Sohn, finance and economics professor at Loyola Marymount University.
"As a result, even if the March surge proves temporary, elevated energy prices may persist into the coming months."
Stocks on Wall Street were lower. The dollar fell against a basket of currencies. US Treasury yields rose.
Food prices were unchanged after rising 0.4 percent in February. Grocery store prices fell 0.2 percent amid a 3.4 percent drop in egg prices.
There were also decreases in the prices of meat. Still, beef and veal prices increased 12.1 percent year-on-year.
Fruit and vegetable prices rose 1.0 percent and were up 4.0 percent in the 12 months through March.
Excluding the volatile food and energy components, the CPI increased 0.2 percent, matching February's gain.
Core CPI inflation was restrained by a 0.4 percent drop in prices for used cars and trucks as well as a 1.5 percent tumble in prescription medication, which some economists said was likely a one-off drop.
The report showed the cost of health insurance decreased further, falling 1.4 percent. It dropped 5.3 percent year-on-year.
"This is simply wrong, and by more than a little," said Stephen Stanley, chief US economist at Santander US Capital Markets. "Perhaps it is my imagination, but it seems that the quality of the CPI data has deteriorated since last fall's government shutdown."
Health insurance rates have soared following the expiration of tax credits.
Airline fares increased 2.7 percent, viewed by some economists as an early sign of the oil shock broadening to services inflation. Rents picked up moderately. The pass-through from tariffs continued, with apparel prices rising 1.0 percent. The cost of household furnishings and operations climbed 0.2 percent.
In the 12 months through March, core CPI inflation increased 2.6 percent after advancing 2.5 percent in February.
The Fed tracks the Personal Consumption Expenditures price indexes for its 2 percent inflation target. Economists estimated that core PCE inflation increased 0.2 percent in March after rising 0.4 percent for two consecutive months. That would translate to a year-on-year increase of 3.1 percent, up from 3.0 percent in February.
In the months ahead, economists expect the Middle East conflict to lift core prices through expensive jet fuel that will raise airline fares, and diesel, which will increase the cost of goods transported by road. Prices of fertilizer and plastics, among other goods, are also expected to rise.
Firming inflation has left some economists believing the Fed would not reduce borrowing costs this year, a conviction that was reinforced by the release on Wednesday of minutes of the central bank's March 17-18 policy meeting, which showed a growing group of policymakers last month felt that rate hikes might be needed.
The Fed left its benchmark overnight interest rate in the 3.50 percent-3.75 percent range. Some economists still see a chance of a rate cut, arguing that the destruction of demand through reduced discretionary spending power could make it difficult for some businesses to raise prices.
"Rate cuts are more likely than hikes," said James Knightley, chief international economist at ING.
