US CPI surges 0.9% in largest monthly jump since 2022 on gas

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 Labour 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 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 fertiliser is expected to eventually lead to higher grocery bills, while rising transportation costs could impact all kinds of consumer goods.

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“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.”

S&P 500 futures remained higher on the day, and the dollar fell.

Goods, services

Despite the 21% rise in gas prices, increases in other categories were relatively tame in March. The prices of goods excluding food and energy, a category economists and policymakers have been watching closely to gauge the impact of President Donald Trump’s tariffs, rose a modest 0.1% for a second month. Used-car prices fell for a fourth straight month, though prices for new cars and apparel rose.

Grocery costs fell 0.2% on a decline in meat, dairy and egg prices. Bloomberg Economics estimates it could take as long as a year for higher fertilizer costs to impact the CPI.

Services costs excluding energy rose 0.2% in March. Airfares rose 2.7% from February as some customers rushed to lock in prices before they jump further as the war pushes the cost of jet fuel higher. United Airlines Holdings Inc. recently warned it may have to hike prices by 20% because of the oil shock.

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Another services gauge Federal Reserve officials watch closely, which strips out housing and energy costs, also rose 0.2%, the slowest pace this year. Shelter prices — which comprise the largest portion of the index — rose 0.3%.

Medical care services costs were little changed, while a category called other personal care services — which includes haircuts — fell by the most on record. Admissions to sporting events fell more than 10%.

Fed officials are closely tracking the impact the oil shock and the war more broadly will have on prices. Investors see little chance of another interest-rate cut in 2026 amid renewed inflation risks, according to futures, though many economists are maintaining forecasts for one or more reductions later in the year.

Central bankers also pay attention to wage growth because it can help inform expectations for consumer spending, the main engine of the economy. A separate report Friday that combines the inflation figures with recent wage data showed that real average hourly earnings rose just 0.3% from a year ago, the least since 2023.

Economists have lowered their growth estimates for this year on expectations that higher prices and a weaker labor market will take a toll on consumer spending. Government data out this week showed inflation-adjusted spending barely rose in February, adding to a streak of sluggish demand.

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