Inflation isn't going to slow anytime soon, even if the Iran cease-fire holds. Here's why.

MW Inflation isn't going to slow anytime soon, even if the Iran cease-fire holds. Here's why.

By Jeffry Bartash

PCE and CPI inflation reports to show price pressures rising again

Gas prices are crazy high at a Chevron station in Los Angeles. The Iran war has jacked up the the cost of oil and added to U.S. inflation.

The U.S.'s cease-fire with Iran has driven oil prices lower - but the cost of the conflict is primed to show up quite visibly on Friday in the latest monthly snapshot of consumer prices. Nor is inflation likely to wane anytime soon.

Millions of Americans, of course, have already been felt the effects of the conflict when fueling up at the gas pump. They don't need to see the latest statistics to tell them that.

The average cost of a gallon of regular gas jumped to $4.15 last week, from just under $3 before the conflicted erupted, according to GasBuddy.com. It's the first time prices have topped $4 nationally since 2022.

Surging oil and gas prices are expected to boost the consumer-price index by 0.9% in March when the report is released on Friday. The CPI measures changes in the cost of living for U.S. households.

An increase of that size is four to five times the normal monthly advance.

The upturn in consumer prices in the 12 months ended in March, meanwhile, could shoot up to a nearly two-year high of 3.3%, from 2.4% in the prior month.

Rising inflation is the latest in a series of body blows to the U.S. economy. When Americans have to pay more to fill up, they have less money to spend on other goods and services.

Oil prices can fall as suddenly as they rise, and if the conflict with Iran actually ends soon, gasoline prices will also level off. The price of a barrel of oil (CL00), for instance, sank 17% on Wednesday to $95 after the cease-fire was announced.

How much oil prices will further decline is still unclear, though. It will depend on how much damage the war has caused to energy-producing facilities in the Middle East, how long the damage takes to repair and whether the critical Strait of Hormuz is fully reopened.

The cost of oil was still 42% higher on Wednesday when compared to the day before the five-week-long war erupted.

Given the ups and downs in energy prices, the Federal Reserve prefers to assess the true, or underlying, rate of inflation by looking at what is known as the core rate of inflation.

The core rate is forecast to rise a more modest 0.3% in March, but that's still higher than the Fed would like. What's more, the yearly rate of core inflation is seen climbing to 2.7%, from 2.5%, moving further away from the Fed's 2% annual target.

If oil prices were to remain well above prewar levels, the Fed could not simply ignore the overall increase in consumer prices. At the very least, the central bank would be quite reluctant - if not flat-out unwilling - to cut interest rates until inflation began to subside again.

Even before the Iran war, however, the Fed's progress in reducing the rate of inflation to its 2% long-term goal appeared to hit a wall.

Take the Fed's preferred measure of inflation known as the personal-consumption expenditures index, seen as more accurate measure of what Americans pay instead of the CPI.

The PCE index posted bigger-than-expected increases in December and January, and another uncomfortable 0.4% increase is expected for February.

The February PCE comes out Thursday - a day before the CPI - in an unusual scheduling quirk stemming from several government shutdowns since last fall.

If Wall Street's forecast is correct, the 12-month increase in the PCE is likely to hold steady at 2.8%. The more critical core rate would either stay at 3.1% or perhaps fall a tick to 3.0%.

Either way, the rate of U.S. inflation would still be well above the Fed's 2% goal.

Nor can Wall Street DJIA SPX or Main Street expect much price relief in the near future.

For one thing, the unresolved Iran conflict is expected to keep oil prices elevated for at least a few more months and leave oil-tanker traffic in the Strait of Hormuz uncertain. One-fifth of the world's oil flows through the strait.

"Even if traffic resumes, we expect global oil-supply normalization to take time, with prices likely to remain elevated relative to preconflict levels in the months ahead," said Brock Weimer, investment-strategy analyst at Edward Jones.

The war has also raised the cost of fertilizer, and those increases could show up in food prices later in the year.

Meanwhile, the Trump tariffs imposed in 2025 have been replaced by new ones after the Supreme Court in February struck down the administration's original duties as unconstitutional.

Business leaders say they are still facing higher prices from the tariffs and they are trying to pass part of the costs on to customers. The court ruling has also added another layer of complexity on top of an already confused situation.

"Tariff rollbacks are resulting in favorable price adjustments, but the news of new implementation is driving continued uncertainty," a top executive at a restaurant chain told the Institute for Supply Management.

Still, many economist continue to think inflation will begin to wane again later in the year - just not as much as they had previously forecast.

The Fed itself sees inflation as measured by the PCE ending in 2026 closer to 3% than 2%, an outcome that would make it harder for the central bank to cut interest rates this year.

If there is any good news on the inflation front, the cost of labor is not a factor like it normally is when prices surge. Wage growth has slowed in the past year and shows little sign of adding to inflationary pressures.

-Jeffry Bartash

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April 08, 2026 13:57 ET (17:57 GMT)

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