U.S. inflation re-accelerated in March, with the personal consumption expenditures price index up 0.7% on the month and 3.5% from a year earlier, the fastest annual pace since May 2023. Gasoline did a lot of the damage: the average national retail price jumped 24.1% in March as the Iran war squeezed oil flows.
The real sting is that the core measure, which strips out food and energy, stayed hot at 3.2% year over year and rose 0.3% in March. That leaves the Fed with a familiar problem: headline inflation can be blamed on energy, but the underlying number is still far above its 2% target.
- PCE rose 0.7%, the biggest monthly increase since June 2022.
- Core PCE held at 3.2%, unchanged from February and still well above target.
- Consumer spending climbed 0.9% in March, but only 0.2% after adjusting for inflation, a sign that price pressure is already slowing real demand.
The reframing here is simple: this is no longer just a gasoline story. The market is being asked to price a longer stretch of restrictive policy, because the data gave the Fed cover to stay put on Wednesday and little reason to talk about cuts soon. If energy stays elevated into the second quarter, real spending growth gets squeezed harder and the “transitory” excuse disappears again.
That makes the next inflation print and the path of pump prices the numbers to watch. If gasoline stays near its current highs, the Fed gets less room to move and households get less relief heading into summer.
