Inflation still sticky

Gasoline gave people a visible break earlier this year, but the Federal Reserve’s own inflation gauge was still running at 3.0% in February, with core prices rising 0.4% for a third straight month. The Federal Reserve targets 2% inflation on that measure, not 3%. (bea.gov; federalreserve.gov) That is why Wall Street is nervous about the March Consumer Price Index report due Friday, April 10 at 8:30 a.m. Eastern time. Economists surveyed by Reuters expect a 0.9% monthly jump in headline inflation, which would be the biggest since June 2022. (bls.gov; srnnews.com) Before the March spike, the February Consumer Price Index already showed inflation was not gone. Consumer prices were up 2.4% from a year earlier, and core inflation, which strips out food and energy, was still 2.5%. (bls.gov; cnbc.com) Core inflation is the part economists watch when they want to know if price pressure is baked into the system instead of just bouncing around with oil and groceries. In February, that “under the hood” measure was still moving faster than the Federal Reserve wants even before the Middle East shock hit energy markets. (bea.gov; federalreserve.gov) March looks worse mainly because oil moved first and fast. CBS News, citing six forecasts, said the March Consumer Price Index is expected to rise at a 3.3% annual pace, while FactSet’s median estimate is 3.4%, which would match the highest reading since April 2024. (cbsnews.com; insight.factset.com) The problem is that energy shocks do not stay in the gas station column for long. Reuters reported that economists are also watching for fuel surcharges and higher transport costs to spill into food and other goods after the initial oil jump. (srnnews.com) There is also a second layer underneath oil. Morningstar said tariffs were already pushing underlying inflation higher, which means March is not just a one-off war story but a report mixing fresh energy pressure with older price pressure that never fully cooled. (morningstar.com) Federal Reserve officials were already talking this way before the data hit. Minutes from the March 17-18 meeting show policymakers saw the war as likely to lift inflation in the near term, while some officials also wanted to keep open the possibility that rates might need to rise, not fall. (federalreserve.gov; reuters.com) That leaves the Federal Reserve in an awkward spot. If headline inflation jumps because of oil while core inflation stays sticky near 3%, rate cuts get harder to justify because the central bank would be staring at both a fresh shock and an old inflation problem at the same time. (federalreserve.gov; bea.gov; cnbc.com) So the real story in this report is not whether one month looks ugly. It is that inflation was still above target before the oil surge, and March may show how quickly a temporary energy shock can land on top of a price trend that never really went away. (cnbc.com; cbsnews.com)