STORY: U.S. inflation increased in February and likely rose further in March amid the war with Iran, a trend that is expected keep the Federal Reserve from cutting interest rates any time soon.
The Commerce Department on Thursday said its personal consumption expenditures or PCE price index climbed 0.4% in February.
That was in line with economists' expectations but slightly higher than January's increase.
It put the annual inflation rate at 2.8%.
Core PCE, which excludes food and energy prices, rose 3% on a year-over-year basis.
That was still above the 2% target set by the Federal Reserve, which sees the core number as a better indicator of future inflation.
February's data was released later than usual due to delays caused by last year's government shutdown.
Inflation was already elevated before the U.S and Israel attacked Iran, largely because of President Donald Trump's import tariffs.
The war has boosted global oil prices and sent the average gasoline price in the U.S. soaring above $4 per gallon for the first time in more than three years.
Trump this week announced a two-week ceasefire with Tehran on the condition that it reopens the Strait of Hormuz, which has also affected shipments of fertilizers and other goods.
The disruptions are expected to raise food prices in the months ahead, explains Dennis Follmer, chief investment officer at Montis Financial.
"Definitely in terms of fertilizers to the farmers, you know, even if those ships get through, if they miss the planting season, we're going to be definitely talking about less supply of food, higher prices, inflation, you know, everything you use to transport in this country, we're going to be talking about higher gas prices, higher input costs."
The Commerce Department on Thursday also reported that U.S. GDP for the fourth quarter increased at a downwardly revised annualized rate of 0.5%, which was below economists' expectations.
