{"id":9347,"date":"2026-04-10T14:19:13","date_gmt":"2026-04-10T14:19:13","guid":{"rendered":"https:\/\/www.rbc.com\/en\/economics\/?p=9347"},"modified":"2026-04-10T14:30:51","modified_gmt":"2026-04-10T14:30:51","slug":"us-cpi-headline-inflation-soars-as-gas-prices-spike-amid-middle-east-conflict","status":"publish","type":"post","link":"https:\/\/www.rbc.com\/en\/economics\/us-analysis\/us-data-flashes\/us-cpi-headline-inflation-soars-as-gas-prices-spike-amid-middle-east-conflict\/","title":{"rendered":"US CPI: Headline inflation soars as gas prices spike amid Middle East conflict"},"content":{"rendered":"\n
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Bottom line:<\/h4>\n\n\n\n

Higher gas prices sent headline inflation soaring in March as the monthly rise (+0.9% m\/m) was reminiscent of 1970s inflation. The silver lining is core inflation remained subdued, rising a modest +0.2% m\/m.<\/strong> The continued slowdown in core inflation will provide some term relief for the Fed. But the risk remains that higher energy prices could start to spill over into the broader economy if the conflict in the Middle East persists. Higher oil risks pushing transport costs up and continued tariff effects are layering additional pressure onto core goods. As we\u2019ve been highlighting, prices for trade exposed sectors, including auto parts, apparel, personal and recreational goods continued<\/a> to rise at an uncomfortable pace. For the Fed, the question remains how businesses will react to the oil price shock: will they continue to pass on higher prices to consumers or will they protect margin compression through layoffs? For now, the Fed will have to remain data dependent before they decide their next move.<\/p>\n\n\n\n

There are 3 core themes that stood out in today\u2019s report:<\/p>\n\n\n\n

I. Even if the Fed is not focused on headline, higher energy prices will hurt consumers<\/strong><\/p>\n\n\n\n

As expected, motor fuel prices posted a massive spike in March (+21.5% m\/m). And higher fuel prices translated to a spike in airfares in March (+2.7% m\/m). Energy commodities and services added close to 0.8 percentage point to the overall index. While the Fed is more focused on core inflation, spikes in gasoline prices influence consumer inflation expectations. Persistently elevated gas prices could ultimately be a problem for wage expectations, and the duration of the shock will matter. <\/p>\n\n\n\n

If the oil price shock persists (weighing on fertilizer prices and transportation costs), we would expect to see core goods pressures heat up from higher input costs at the same time that tariff passthrough peaks (later this year). We are already seeing spikes in wholesaler margins in PPI, declining corporate profits in trade-exposed sectors, and now, a spike in manufacturers\u2019 prices paid (as reflected in the March ISM data).<\/p>\n\n\n\n

II. Tariff pressures are continuing to show up in core goods inflation<\/strong><\/p>\n\n\n\n

In March, core goods (+0.11% m\/m) was modest, but similar to last month, this is a story of used motor vehicle prices masking tariff<\/a> passthrough. Here\u2019s what we saw in trade-exposed sectors:<\/p>\n\n\n\n