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U.S. inflation accelerated in March as gasoline prices moved sharply higher. The Consumer Price Index for All Urban Consumers (CPI-U) rose 3.3 percent between March ’25 and March ’26, up from a 2.4 percent increase recorded in February. That marks the highest annual inflation rate in almost two years, as disruptions to shipping through the Strait of Hormuz pushed up oil and related fuel prices. Outside of fuel, price pressures remained more contained, with annual core inflation (which excludes food and energy) rising modestly to 2.6 percent in March from 2.5 percent in February.

At 3.3 percent, overall inflation matched the expectations of economists in a recent Wall Street Journal survey. Core inflation, at 2.6 percent, came in slightly lower than the 2.7 percent that same group anticipated. The sudden increase in energy prices, coupled with a stronger-than-expected national jobs report for March, is likely to deter the Federal Reserve from cutting interest rates in the near term.

Nationwide, gas prices rose 24.9 percent over the month following the onset of conflict with Iran. Looking year-over-year, that represents an 18.9 percent increase. Other energy categories also rose during that span, with utility gas prices up 6.4 percent and electricity prices up 4.6 percent. Outside of energy, inflation remained firm in several major consumer categories: prices for apparel, food away from home (i.e. meals at restaurants), medical care, and shelter all rose by at least three percent. More modest increases were recorded in alcoholic beverages, food at home, new vehicles, and recreation, where price growth remained below three percent. By contrast, education and communication services were flat, while used vehicle prices declined by 3.2 percent.

Inflation data for April will be published by the Bureau of Labor Statistics on Tuesday, May 12.

Colin Baker
Manager of Economic Research
[email protected]