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.