C onsumers will pay more for gas and cut back on other spending as gasoline prices surged 21.2% in March. The jump in fuel costs is the largest monthly increase in six decades.
Related Brief 1h ago
interest rates Markets drop on Fed pause as oil and inflation defy cooling
The Dow Jones Industrial Average fell nearly 800 points, or 1.6%, after the Federal Reserve left interest rates unchanged on March 18, 2024, citing uncertainty from the war in Iran and ongoing inflation pressures. The S&P 500 dropped 1.4%, reaching its lowest level since November, while the Nasdaq Composite declined 1.5%. Wall Street’s “fear gauge,” the VIX Composite, spiked nearly 10%. The Fed’s decision not to raise rates came despite a hotter-than-expected reading on wholesale price inflation. Investors responded by selling bonds, pushing the yield on the 10-year U.S. note up to about 4.26%, a rise of nearly 6 basis points. Bond yields move inversely to prices. Oil prices added to inflation concerns, with Brent crude rising nearly 6% to around $105 a barrel. That kept the nationwide average for a gallon of gas at $3.86, according to GasBuddy’s tracker. Fed Chair Jerome Powell pointed to geopolitical uncertainty as a key reason for the central bank’s cautious stance.
The increase was driven by the U.S. war in Iran. Gasoline prices averaged $4.15 a gallon nationwide on Friday, up from $2.98 the day before the war began. The broader energy index rose 10.9% in March, the largest monthly increase since September 2005. Fuel oil also rose 30.7%, the largest monthly increase since February 2000.
Related Brief 1d ago
inflation Gasoline prices surge 21.2% in a month as Iran blocks Strait of Hormuz, pushing inflation to 3.3%
Inflation surged to 3.3% in March over the past 12 months, the highest level since May 2024, up sharply from 2.4% the previous month. The jump marks a direct hit to household budgets, as rising energy costs ripple through transportation, shipping, and consumer goods. The core Consumer Price Index, which excludes volatile food and energy, also ticked up to 2.6% from 2.5%, signaling broader price pressures are persisting. The main driver: gasoline prices soared 21.2% in a single month — the largest monthly increase in two years. That spike was not random. It followed Iran’s blockade of the Strait of Hormuz, a chokepoint for 20% of the world’s oil supply. The disruption has triggered the worst energy supply shock on record, constricting global oil flows. With energy-intensive sectors now passing on higher costs, inflation is accelerating just as the Federal Reserve weighs when to cut interest rates. That decision is now in doubt — the hotter CPI report undermines the case for near-term rate relief.
These energy costs pushed consumer prices up 0.9% in March from February, the largest monthly increase in nearly four years. Year-on-year consumer prices rose 3.3% in March, up from 2.4% in February.
Related Brief 1h ago
monetary policy Oil Price Spikes Establish a Higher-for-Longer Interest Rate Floor
Borrowing costs will remain elevated for longer. The Federal Reserve maintained its benchmark interest rate at 3.5% to 3.75% during its March 18 policy meeting. The Federal Reserve's 2% inflation target remains a distant goal. Chair Jerome Powell cited inflation concerns and uncertainty from the war in the Iran war. Brent crude oil prices rose nearly 6% to around $105 a barrel, following geopolitical conflicts in the Middle East that had briefly pushed prices above $85 a barrel. March headline inflation is projected to rise 0.9% month-over-year, the largest jump since June 2022, reaching 3.4% year-over-year. Borrowing costs will remain elevated costs for longer.
Core inflation, which excludes food and energy, rose a modest 0.2% in March and 2.6% over the past year. This suggests the gas price shock has not yet spread to other categories.
Related Brief 3h ago
monetary policy Interest Rate Stability Masks a Market Sell-Off Triggered by Oil Inflation
The Dow Jones Industrial Average fell 1.6% to its lowest level since November, while the S&P 500 dropped 1.4% to its same same level. The Nasdaq Composite lost 1.5%. These losses occurred after the Federal Reserve concluded a policy meeting on March 18 and maintained interest rates at current levels. The sell-off was driven by inflation measures that exceeded analyst expectations. Investors responded by selling bonds, which pushed the 10-year U.S. note yield to 4.26%. Fed Chair Jerome Powell cited uncertainty from the war in Iran as a reason for the stability of rates. Brent crude oil closed at $105 a barrel, up nearly 6%, and the nationwide average for a gallon of gas reached $3.86. The VIX Composite spiked nearly 10%.
The Federal Reserve began the year expecting to cut its key interest rate, currently at about 3.6%, at least a couple of times. Fed officials are now considering rate hikes if core inflation does not cool. Investors now do not expect the Fed to cut rates until late 2027.
Related Brief 10h ago
inflation Trump Tariffs Result in Full Consumer Price Pass-Through
Consumers paid a dollar-for-dollar price increase for goods when retailers' acquisition costs rose due to 2025 tariffs. If a retailer's cost for a good rose by $1 because of a tariff, the consumer paid $1 more for that good seven months months later. This full pass-through to consumer prices is now effectively complete. These tariffs, implemented by President Donald Trump in 2025, raised core goods personal consumption expenditure (PCE) prices by 3.1% through February 2026. The Federal Reserve's preferred inflation metric, the broader core PCE index, rose by 0.8% as a result.
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