Inflation Reaccelerates

March prices hit hard enough that real hourly earnings fell 0.6% in one month, even with wages still rising, because the Consumer Price Index jumped 0.9% in March and 3.3% from a year earlier. The biggest shove came from energy, which surged 10.9% in March. (cnbc.com) (bls.gov) Strip out food and energy, and the pace looked calmer: core inflation came in at 0.2% for the month and 2.6% from a year earlier. That split matters because it says the March shock was not a broad jump across everything people buy. (bloomberg.com) (cnbc.com) Energy moves fast because gasoline and fuel oil can reprice almost overnight, while rents and medical bills usually crawl. In March, that fast-moving part of the basket swamped the slower parts. (bls.gov) (cnbc.com) The Federal Reserve aims for 2% inflation, not 3.3%, so one hot month pushes interest-rate cuts further out unless the spike fades quickly. San Francisco Federal Reserve President Mary Daly said on April 10 that the oil shock means getting inflation back to target will take longer. (usnews.com) (reuters.com) Daly also said policy is already restrictive, which is central-bank language for borrowing costs being high enough to cool demand. If oil keeps prices elevated while growth slows, the Federal Reserve gets stuck waiting instead of cutting. (usnews.com) (reuters.com) There is a second inflation story running underneath the oil spike, and it is about goods on store shelves rather than fuel at the pump. New Federal Reserve research published April 8 estimated that tariffs in place through November 2025 raised core goods prices by 3.1% through February 2026. (federalreserve.gov) That paper says the tariffs explain the entirety of excess inflation in core goods relative to pre-pandemic rates, and it estimates a 0.8% boost to core personal consumption expenditures prices overall. In plain English: import taxes did not stay at the port; they showed up in retail prices. (federalreserve.gov) The same research says pass-through is “effectively complete,” which means companies have already pushed most of the tariff cost onto consumers instead of eating it in their margins. That helps explain why goods inflation stayed sticky even before March’s energy jolt. (federalreserve.gov 1) (federalreserve.gov 2) So the March report is really two different problems landing in the same month. Oil made inflation jump quickly, and tariffs had already been keeping goods prices from settling back down. (cnbc.com) (federalreserve.gov) If energy prices cool, the headline number can fall back fast, because gasoline works like a thermostat that can swing both ways. If tariffs stay in place, core goods inflation is less likely to unwind on its own, because those costs are already baked into thousands of everyday items. (bls.gov) (federalreserve.gov)