Inflation jumps to 3.3%

U.S. consumer prices rose 3.3% in March, the fastest annual pace since April 2024, after a gasoline shock pushed monthly inflation sharply higher. (bls.gov, cnbc.com) The Consumer Price Index climbed 0.9% in March after a 0.3% gain in February, the Bureau of Labor Statistics said on Friday, April 10. Gasoline prices jumped 21.2% in a single month and accounted for nearly three-quarters of the increase in the headline index. (bls.gov, cnbc.com) A narrower measure that strips out food and energy was calmer. Core inflation rose 0.2% in March and 2.6% from a year earlier, both below economists’ forecasts collected by Dow Jones. (cnbc.com) The split matters because the March surge came from energy, not from broad price increases across most categories. The Bureau of Labor Statistics said the energy index rose 10.9% in March, while CNBC reported declines in medical care, personal care, and used cars and trucks. (bls.gov, cnbc.com) Oil traders and economists tied the gasoline spike to the war with Iran, which Reuters reported has stalled flows through the Strait of Hormuz, a passageway that handles about one-fifth of global oil consumption. Reuters also reported on April 10 that analysts now expect the conflict to push the oil market into a supply deficit in 2026 after earlier forecasts for oversupply. (usnews.com, am.gs.com) Households are already reacting. The University of Michigan’s consumer sentiment index fell to 47.6 in early April from 53.3 in March, the lowest reading in the survey’s history, while one-year inflation expectations jumped to 4.8% from 3.8%. (usnews.com, cnbc.com) That combination leaves the Federal Reserve in a tighter spot. CNBC reported that markets were already pricing little chance of an interest-rate cut through the rest of 2026 even before the new inflation and sentiment data arrived. (cnbc.com) Wall Street is split on how lasting the shock will be. Goldman Sachs Asset Management said in a March 3 note that a longer conflict could contribute to sustained market weakness, but said its base case still assumes the broader growth hit would be short-lived unless oil infrastructure damage or a prolonged Hormuz closure pushes crude above $100 a barrel. (am.gs.com) Markets have already been swinging with each turn in the conflict. The Cboe Volatility Index fell to 20.18 on April 8 after a temporary ceasefire announcement, Bloomberg reported, but Goldman Sachs Asset Management said volatility had already jumped across equities, bonds, currencies, and commodities as investors debated how long the fighting would last. (bloomberg.com, am.gs.com) For now, March inflation looks like an energy shock more than a full economy-wide price spiral. The next question is whether lower April energy prices after the ceasefire hold long enough to keep one bad inflation report from becoming a trend. (cnbc.com, bloomberg.com)