The strongest monthly rise in gasoline prices in sixty years last month caused a significant acceleration of inflation in the United States, posing major challenges to Federal Reserve officials and exacerbating considerable political obstacles facing the White House. Consumer prices rose by 3.3% in March compared to the previous year, the Labor Department announced on Friday, a significant acceleration from the 2.4% level recorded in February, marking the largest annual increase since May 2024. On a monthly basis, prices increased by 0.9% in March compared to February, representing the largest rise of this kind in over four years.
This is the first measure of inflation to reflect the effects of the war in Iran. The surge in gasoline prices will severely test the budgets of low- and middle-income households, making it harder to purchase other essential goods, such as food and rent.
Excluding food and energy, which have volatile prices, core prices rose by 2.6% in March compared to the previous year, up from 2.5% in February. Last month, core prices only increased by 0.2% compared to February, suggesting that the rise in gasoline prices has not yet impacted many other categories.
A big question at the moment is how long the shock of oil and gas prices will last and whether it will lead to a broader and more sustained inflationary push, similar to the one that occurred in the spring of 2022 after Russia’s invasion of Ukraine. Economists currently believe that it is unlikely for the United States to experience a generalized increase similar to a few years ago, when inflation exceeded 9%.
Nevertheless, the evolution of the war and its impact on inflation in the coming months remains highly uncertain. Despite a fragile ceasefire, little has changed in the Strait of Hormuz, a chokepoint where millions of barrels of oil usually pass through each day.
“It’s painful in the short term,” said Michael Pearce, chief U.S. economist at Oxford Economics. “It will become even more painful in April,” when new increases in gasoline prices will drive up inflation.
However, Mr. Pearce indicated that the impact may be shorter-lived than after the pandemic: “I think the situation resembles more of a brief and sharp shock than what we experienced in 2022.”
Industries dependent on oil and gas are paying higher prices, especially airlines, which have passed on these higher costs to travelers. Fares surged by 2.7% just last month and are 14.9% higher than a year ago. Many delivery services, including UPS and FedEx, have already announced fuel surcharges that have raised shipping costs for businesses and households.
Food prices decreased by 0.2% last month and increased by only 1.9% compared to the previous year, but economists believe they will rise in the coming months as diesel prices rise. Most food items are transported by truck.
The rise in fuel prices “contributes to the increase in production costs throughout the food supply chain and could put upward pressure on food prices in the future,” said Andy Harig, vice president of the professional group FMI-The Food Industry Association. “As energy prices rise, costs related to food production and delivery also increase.”
Christopher Rugaber, The Associated Press
