The U.S. economy is poised to receive its first official indication of how the ongoing war with Iran is affecting inflation, as the Bureau of Labor Statistics prepares to release the March Consumer Price Index (CPI) report on Friday [1]. Wall Street analysts expect inflation to remain elevated, with core inflation (excluding food and energy) forecasted to rise to 2.7% year-over-year, up from 2.5%. When including food and energy, forecasters anticipate annual inflation to have climbed to 3.3% [1].
The conflict with Iran has already pushed prices higher for many consumer goods, though the full impact may not be reflected in the upcoming report. Gasoline prices surged last month to their highest levels since the Covid-19 pandemic, while diesel and jet fuel prices set new records. Companies such as Amazon and airlines have responded by increasing fees to offset soaring fuel costs, and these fees are unlikely to return to pre-war levels [1].
Inflation remains persistent in other sectors as well, with used car prices beginning to rise again, continued elevated inflation in the services sector, and food prices—particularly ground beef—remaining at record highs [1]. Despite these pressures, some analysts note that consumer inflation was on a cooler trajectory before the conflict, due to slowing housing and rent prices and reduced wage growth. The odds of Federal Reserve interest rate cuts, previously estimated at two before the war, have increased following the announcement of a two-week ceasefire on Tuesday, which has eased some concerns about further economic fallout [1].
Gregory Daco, chief economist at EY-Parthenon, highlighted that the Federal Reserve’s preferred inflation gauge firmed in February, reflecting the impact of tariffs. He also warned that other income and spending data indicate the U.S. economy remains fragile, stating, "Make no mistake, households are increasingly running on fumes" [1]. Analysts at Citi’s research unit believe a softening labor market will limit substantial upside to spending and inflation [1].
CONCLUSION
The March CPI report is expected to show elevated inflation, driven by the economic shock from the U.S.-Iran conflict and surging fuel prices. While the ceasefire has eased some concerns, analysts warn that the full impact may not yet be reflected and that the U.S. economy remains fragile. Market participants are closely watching for signs of inflation moderation and potential Federal Reserve rate cuts.