U.S. inflation jumped hard in March: the personal consumption expenditures index rose 0.7% from February and 3.5% from a year earlier, the biggest annual gain since May 2023. Gasoline did the damage. The average national retail price surged 24.1% in the month as the Iran war tightened the oil trade.
Core PCE, the Fed’s preferred stripped-down gauge, still rose 0.3% on the month and 3.2% on the year. That is the number that now matters for policy. The central bank already left rates unchanged this week, and this report makes it harder to sell the idea that cuts are around the corner.
- Consumer spending climbed 0.9% in March, but real spending rose only 0.2% after inflation.
- The Commerce Department’s report showed first-quarter GDP data at the same time, with inflation doing more of the work than demand.
- Economists expect the war’s drag on growth and prices to show up more clearly in the second quarter.
This is the reframing: the story is no longer just that inflation is reaccelerating. It is that energy prices have given the Fed a fresh excuse to stay put while household spending loses real momentum. For borrowers, rate relief just moved farther out. For businesses, pricing power has to survive with weaker volume behind it.
The sticky sentence here is simple: gasoline is back in charge of inflation. If pump prices stay elevated into the second quarter, the Fed’s next move is probably still waiting.
