The war on inflation may be on the back burner due to the The war in Iran.
The Consumer Price Index this week is expected to show March prices rose at an annual pace of 3.3%, the average of six separate forecasts reviewed by CBS News. That would mark the highest rate of inflation since May 2024 and a jump of almost one percent since February.
The CPI report will be released at 8:30 am ET on Friday.
“The impact of the war on energy prices will push CPI inflation above 3% in March and above 4% in April,” Oxford Economics said in a report on Wednesday.
Inflationary pressures are being driven by higher energy prices associated with the Iran war, and the US is facing the biggest one-month jump in fuel prices since at least 1957, according to Pantheon Economics.
The impact of the conflict on many goods and services is likely to drag on for months, and experts say the two-week standoff between the US and Iran is unlikely to quickly ease global energy shortages.
Higher fuel prices can increase the cost of other goods, including food, due to increased transportation and production costs. Energy prices tend to rise rapidly during oil supply disruptions but fall slowly after the crisis ends – an economic miracle we call “rockets and feathers“the goal.
First year break
“We’re going to pay the price for this for years,” Mark Zandi, an economist at financial research firm Moody’s Analytics, told CBS News. “We should see a little bit of a disruption in airline ticket costs. Grocery prices are probably going to be higher. Obviously, that goes to moving food from the port or the farm to the store shelf.”
The expected increase in the CPI comes after inflation has cooled to a 2.4% annual rate in the first two months of 2026 – still above the Federal Reserve’s target of 2% but well below the 40-year high of 9.1% recorded in June 2022.
On Thursday, another key measure of inflation showed that daily costs rose in February even before the Iran war, rising 0.4% from January. The Personal Consumption Expenditures price index also showed that consumer spending rose 0.5% in February from the previous month, but that fell to 0.1% when adjusted for inflation, according to EY-Parthenon chief economist Greg Daco.
“Make no mistake, families are becoming more and more suffocated,” Daco wrote in the report.
Even before the Iran war sent gas prices soaring, many Americans were still recovering from pandemic-era inflation and continued to say so. affordability as a major concern. The Trump administration said that “gasoline prices will drop back to the multi-year lows that American drivers enjoyed before this temporary disruption” from the Iran war.
After the US announced the agreement with Iran on Tuesday, the American oil benchmark fell by almost 15%, falling to $96.41 a barrel. But that remains 43% higher than just before the war, consumer figures show he may not see much relief in the next few weeks.
Consumers already pay extra $8.4 billion in fuel costs a month after the start of the Iran war, according to an estimate from the Democratic Alliance’s Joint Economic Committee. Higher prices for other goods and services, from airline fees to higher mortgage rates, can also balance household funds.
Rising prices could strain household budgets and dampen consumer spending if Americans pull back on voluntary purchases, Federal Reserve Bank of Chicago President Austan Goolsbee said. he told CBS News earlier this month. Because consumer spending accounts for about 70 cents for every $1 of GDP, a decline in household spending can hurt the economy.
“combining”
Even before the Iran war, some consumers were showing signs of financial distress, said Elizabeth Pancotti, executive director of policy and advocacy at the Groundwork Collaborative, a left-leaning think tank. Hardship withdrawals from 401(k)s you reached the record last year, while loan delinquency rates even among the highest income households will increase by 2025.
“We’ve started to see an increase in delinquencies. We’ve started to see savings rates go down. We’ve seen wage growth stagnate,” Pancotti told CBS News. “When you pile on that, I think you go from flashing warning signs to big banging bells.”
Businesses are also feeling the impact of higher energy prices, as well as disruptions to other important shipments through the Strait of Hormuz. While about 20% of the world’s energy goes to precious water, other commodities – incl helium, aluminum and fertilizers – also pass through the music.
“Everything that comes in and out of the farm comes in goods, so when the cost of goods goes up, the cattle to transport go up, the food shipped goes up,” said Andrew Coppin, CEO of Ranchbot, a Fort Worth, Texas-based company that sells water monitoring technology to farmers. “And now you have a shortage of fertilizer, and the cost of fertilizer is going up.”
The average rancher drives about 1,000 miles a week to check on their cattle, Coppin noted. “It adds up, even at a time when they didn’t need it,” he said, adding that he expects the price of beef to increase this year due to the high costs faced by farmers.
What are the interest rates like?
Consumers and businesses may not be getting a break from borrowing costs anytime soon. The Federal Reserve will need to deal with higher inflation, and a labor market that is taking off monthly job losses to profits in the past year.
In March, the Fed had penciled in one interest rate reduction in 2026, but expectations of higher inflation this year have prompted many economists to scrap their forecasts.
“The Federal Reserve is on hold until the fog of war clears and they can assess the full impact on the American economy,” Heather Long, an economist at Navy Federal Credit Union, said in an email.
Minutes were released Wednesday of the Fed’s March 17-18 meeting, which it held borrowing costs do not changethey also suggest that some policymakers on the central bank’s 19-member interest rate-setting panel think a rate hike may need to be considered in the future.
If there is one bright spot in inflation, it is that the impact of the Trump administration’s spending has diminished, with the effective tax rate now hovering around 8%. That’s down from 21% in April 2025, when the president first announced his various rates, according to the Yale Budget Lab.
The impact of high import costs is diminishing, Bernard Yaros. is the leading American economist at Oxford Economics, he told CBS News. “Most of the tax passes have happened.”
