March Inflation Rate is Highest in 2 Years

Anyone wondering what effect the war with Iran is having on the U.S. economy got their answer this week.

Sparked by a record increase in gas prices as the cost of oil soars, the U.S. inflation rate climbed to its highest rate in two years.

The effects of the Iran war showed up in the latest US inflation reading. Inflation climbed to the highest rate since May 2024, and gas prices reached a record month-over-month increase.

Multiple news outlets are reporting that the consumer price index increased 3.3% in March from a year ago. That’s up from the 2.4% increase in January and February and just shy of the 3.4% forecast. According to Business Insider, economists had expected inflation to rise due to higher energy prices.

Energy prices were up 10.9% over the month, the largest increase since September 2005, after a 0.6% rise in February. Gas prices saw a 21.2% increase in just a month, the largest on record.

Compared to the previous year, energy prices increased 12.5% in March, the largest rise since November 2022, with gas prices rising 18.9% year-over-year after declining 5.6%, Business Insider reported.

In addition to usual spring demand, Americans have felt the effects of the war at the gas pump. Statistics from AAA showed the national average soared in March, ending the month at $4.018, the first time it surpassed $4 in four years.

The new report doesn’t include the recent temporary ceasefire.

“As risk diminishes, gas prices might come down slightly, mortgage rates might fall, and businesses may gain confidence to hire, but we are still far from business as usual,” Stephen Kates, a financial analyst at Bankrate, told Business Insider.

The Fed is set to meet again to determine its next decision on interest rates April 28-29. Observers believe the Fed will decide to hold rates steady again.

“The implications of developments in the Middle East for the US economy are uncertain,” Federal Reserve Chair Jerome Powell said in the FOMC Press Conference in March. “We will remain attentive to risks to both sides of our dual mandate.”

Even with the ceasefire, experts think the effects of the war will remai in place for awhile.

“Even if the prices of gasoline and diesel start to come down after the conflict resolves, the effect on the economy will be more long-lasting,” Kates tyold Business Insider. “Fuel prices will not fall as quickly as they rose, but they should decline relatively quickly in the months following the end of the conflict. The ripple effects from these events, however, will take longer to play out and will affect the prices of shipped products, manufactured goods, building materials, and consumer products for far longer.”