US inflation accelerates sharply in March as energy shock drives biggest monthly CPI jump since June 2022.
Arielle Ingrassia, Associate Director, Investment Specialist at Evelyn Partners, the UK wealth manager, commented:
“The US Consumer Price Index came in hot as expected in March, jumping 0.9% month-on-month (MoM) and 3.3% year-on-year (YoY), with core coming in at 2.6%. This marks the largest monthly increase since June 2022 and a clear break from the recent pattern of benign inflation prints. After a period of gradual disinflation, the data now points to a renewed near-term inflation impulse, driven largely by energy.
“The escalation in the Middle East, following US-led military strikes on Iran and subsequent retaliation across the region, has pushed oil and gasoline prices higher, reinforcing how energy remains the primary transmission channel into headline inflation. A two-week US-Iran ceasefire has been agreed, but it remains fragile, with ongoing violations, continued fighting in Lebanon, and the Strait of Hormuz still largely closed, keeping energy flows disrupted and oil prices elevated.
“Core goods inflation rose to 1.2% YoY, pointing to a modest pickup beyond purely energy-driven effects, while services inflation remains sticky at 3.0% YoY, continuing to run above levels consistent with a sustained return to target. This suggests the move is not purely a headline energy story, although underlying pressures still appear selective rather than broad-based.
“Second-round effects remain limited for now, with only tentative signs of pass-through at the margin. The latest data still point primarily to a direct energy shock, rather than a broad-based repricing, although some underlying firming likely reflects pressures already in the pipeline.
“For now, this looks like an energy-led reacceleration with contained spillovers, rather than a fully entrenched second-round inflation dynamic. However, if energy prices remain elevated, the risk is that these effects broaden over time through costs, pricing and ultimately inflation expectations.
“From a policy perspective, this reinforces a cautious Fed stance. Recent communication has emphasised patience, with policymakers in no rush to ease amid elevated inflation uncertainty. Markets have pushed back near-term rate cut expectations, with some brief concern around further tightening, although gradual easing later in the year remains the base case. The balance of risks is shifting toward fewer and later cuts, leaving the Fed firmly in wait-and-see mode.”
