The United States recorded its biggest monthly inflation jump since 2022 in March. Headline inflation jumped 0.9% in a month, driven aggressively by gasoline prices that have now surpassed $4 a gallon due to the ongoing conflict between the US-Israel and Iran.
Labor Department data revealed that the gasoline index jumped by 21.2%, recording the highest monthly increase since 1967. The main factor in this increase was the closure of the Strait of Hormuz that blocked the flow of world oil, thus contributing to almost 75% of the overall inflation increase in the month.
In addition to energy costs, the air transportation sector was also affected by a 2.7% increase in airfares. While the overall food index showed no significant change, some essential items such as tomatoes recorded a sharp price increase of more than 15%.
Despite the worrying headline inflation figures, “core inflation” (which excludes food and energy) showed a more stable trend with an increase of only 0.2%. This suggests that price pressures in the US economy are currently focused entirely on the geopolitical energy crisis rather than on strong domestic demand.
Economists describe this as an “economic shock” in which price stability can change drastically in a short period of time. Although annual inflation is at 3.3%, this extraordinary monthly surge puts the Federal Reserve in a difficult position to lower interest rates in the near future.
