Gas Price Spikes Shift Federal Reserve Rate Cut Expectations to 2027

Consumers are paying more for gas and cutting back on other spending as gas prices rose about 20% in March. Nationwide gas prices averaged $4.17 a gallon on Thursday, up 69 cents from a month ago. This surge has pushed inflation to an estimated 3.4% in March, up from 2.4% in February. Core prices, which exclude food and energy, rose to 2.7%.

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Gasoline price spikes lock in higher borrowing costs for 2026

Interest rate cuts are likely delayed for several months as inflation veers away from the Federal Reserve's 2% target. The Consumer Price Index rose 0.9% in March 2026, the largest monthly increase since June 2022. Gasoline prices jumped 21.2%, the largest spike on record, accounting for nearly three-quarters of that monthly rise. National average retail gasoline prices crossed $4 a gallon for the first time in over three years. Diesel prices increased 30.8%, the biggest gain since the government began tracking the category, while overall energy prices rose 10.9%, the sharpest climb since 2005. The annual inflation rate rose to 3.3% in the 12 months through March, up from 2.4% in February. Core CPI, excluding food and energy, increased 0.2% monthly and 2.6% annually. The price surges followed the U.S.-Israeli war with Iran, which closed the Strait of Hormuz and sent global crude oil prices more than 30% higher. The Federal Reserve's March meeting minutes indicate a growing number of policymakers believe rate hikes may be necessary if inflation remains entrenched.

The Federal Reserve began the year expecting to cut its key interest rate, currently at about 3.6%, at least twice. A growing number of officials are now considering rate hikes if core inflation does not cool. Investors now do not expect the Federal Reserve to cut rates until late 2027.

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Borrowing costs for consumers and businesses remain elevated. Interest-rate swaps now price in only a 25% chance of a quarter-point Federal Reserve rate cut by the end of 2026. The Federal Reserve has maintained its benchmark rate at 3.50%-3.75% as inflation remains above its 2% long-run target. Year-over-year PCE inflation held at 2.8% in February, with core inflation at 3.0%. The PCE price index rose 0.4% both overall and excluding food and energy prices. This inflationary pressure follows a surge in energy costs. Brent crude oil prices rebounded above $98 per barrel after surging over 60% in one month following military strikes by the U.S. and Israel against Iran. Gasoline prices exceeded $4 per gallon for the first time in over three years. These energy prices feed into broader food and transportation costs.

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Gas Price Spikes Shift Federal Reserve Rate Cut Expectations to 2027

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A $226 million stock purchase signals that Berkshire’s new leadership sees value where others see risk

USPS Proposed Stamp Price Hike to Offset $118 Billion Cumulative Loss

Gas Price Spikes Shift Federal Reserve Rate Cut Expectations to 2027

Read More Analysis

A $226 million stock purchase signals that Berkshire’s new leadership sees value where others see risk

USPS Proposed Stamp Price Hike to Offset $118 Billion Cumulative Loss

The Ledger Morning

Read More Analysis

A $226 million stock purchase signals that Berkshire’s new leadership sees value where others see risk

USPS Proposed Stamp Price Hike to Offset $118 Billion Cumulative Loss

The Ledger Morning

Read More Analysis

A $226 million stock purchase signals that Berkshire’s new leadership sees value where others see risk

USPS Proposed Stamp Price Hike to Offset $118 Billion Cumulative Loss