STORY: U.S. inflation accelerated in March as the Iran war raised gasoline prices, boosting expectations that the Federal Reserve could keep interest rates unchanged well into next year.
The Commerce Department's Bureau of Economic Analysis said on Thursday that its personal consumption expenditures price index jumped 0.7% in March, the largest gain since June of 2022 .
On an annual basis, PCE inflation shot up 3.5%, the biggest rise since May of 2023.
That is well above the Federal Reserve's 2% target.
Inflation was already elevated before the war, largely because of President Donald Trump's sweeping tariffs.
Meanwhile, the national average price of gas surged 24% in March.
Prices at the pump could continue to climb as global oil prices jumped to a four-year high of more than $126 a barrel on Thursday on concerns that the war in Iran could worsen and lead to a protracted Middle East supply disruption that could hurt global economic growth. Prices later retreated.
Brent crude prices have doubled since the start of U.S.-Israeli attacks on Iran and West Texas Intermediate crude is up around 90% due to the effective closure of the Strait of Hormuz.
Prior to the recent surge in fuel prices, U.S. economic growth was rising.
The Commerce Department said Thursday that U.S. gross domestic product picked up in the first quarter as businesses boosted investment in artificial intelligence and government spending rebounded after a crippling shutdown.
It rose at a 2% annualized rate, though that was below the forecast of analysts polled by Reuters.
The war however is seen eroding household purchasing power through inflation.
