Sharp Jump in Gas Prices Fuels a Rapid Increase in U.S. Inflation in March

SadaNews Economy - The impact of the sudden rise in gas prices in the United States, which consumers have felt, is expected to be fully reflected in the upcoming core inflation data set to be released next week.

Economists anticipate a 1% increase in the consumer price index in March, marking the largest monthly rise since 2022, after the Iran war caused gas prices at fuel stations to rise by about one dollar per gallon.

At the same time, the core consumer price index, which excludes energy and food, is likely to rise by 0.3% compared to the previous month, according to a Bloomberg survey ahead of the Labor Statistics report due on Friday.

A day before the consumer price index is released, the preferred inflation measure of the Federal Reserve will provide an overview of price pressures before the war. Economists believe that the so-called core personal consumption expenditures price index, which excludes food and energy, rose by 0.4% for the third consecutive month in February, indicating that progress toward more moderate inflation was already stumbling even before the outbreak of the conflict.

Amid a stable U.S. labor market, persistent price pressures—along with new inflationary risks arising from the Iran war—highlight the difficulties faced by the Federal Reserve regarding lowering interest rates this year.

Bloomberg Economics Experts' Opinion:

"The extremely strong jobs report expected for March and the drop in the unemployment rate do not support the case for the Federal Reserve to resume interest rate cuts anytime soon. The data expected to be released this week are also unlikely to support interest rate cuts."

-Anna Wong, Stewart Powell, Eliza Winger, Chris G. Collins, Alex Tanzi, and Troy Duster

The release of the minutes from the central bank's monetary policy meeting in March, expected midweek, may shed light on officials' concerns regarding inflation or the potential economic ramifications arising from the conflict with Iran and associated disruptions in energy and other commodity flows.

In addition to the personal consumption expenditures price data, the Bureau of Economic Analysis report will include figures on personal spending as well as incomes. Economists expect a limited increase in inflation-adjusted spending.

Among other reports expected to be released next week, the Institute for Supply Management's services activity index for March will be available on Monday. On Friday, the University of Michigan will release the preliminary reading of the consumer confidence index for April.