Oil shock pushes US inflation to nearly four-year high

U.S. consumer prices rose at the fastest pace in nearly four years in March, driven by surging energy costs linked to escalating conflict in the Middle East and ongoing tariff effects, reinforcing expectations that interest rates will remain elevated.

The Consumer Price Index (CPI) jumped 0.9% last month, the largest monthly increase since June 2022, according to the Labor Department’s Bureau of Labor Statistics on April 10. That compares with a 0.3% rise in February. On a year-on-year basis, inflation accelerated to 3.3% in March from 2.4% the previous month.

Economists polled by Reuters had forecast both the 0.9% monthly gain and the 3.3% annual reading.

Excluding food and energy, core CPI rose 0.2% month-on-month for a second consecutive month, bringing the annual core rate to 2.6%, up from 2.5% in February.

The inflation surge follows a sharp rebound in job growth, signaling continued labor market resilience. However, economists warn that prolonged Middle East tensions could weaken employment if higher prices force consumers to cut spending.

Energy markets have been particularly affected, with global crude oil prices jumping more than 30%. U.S. gasoline prices have climbed above $4 per gallon for the first time in over three years, adding pressure on households and transportation costs.

The report also highlighted broader inflation risks as higher fuel costs feed into airfare, shipping, fertilizer, and plastics prices. Tariff pass-through effects are also contributing to price pressures, offsetting easing rental inflation.

While some policymakers still see room for potential rate cuts if economic conditions deteriorate, recent Federal Reserve discussions suggest a growing openness to keeping or even raising rates if inflation persists. The Fed left its benchmark overnight interest rate in the 3.50%-3.75% range.

By Sabina Mammadli