Inflation Hits 40-Year High—Spiking 8.5% In March As Ukraine Invasion Fuels Oil Prices

Topline

Consumer prices rose 8.5% in the 12 months ending in March, according to data released Tuesday by the Labor Department, climbing at the quickest pace in four decades following an unprecedented surge in gas prices last month spurred by Russia’s invasion of Ukraine.

Key Facts

Key Background

Rising energy prices have elevated inflation readings during the pandemic to the highest level in decades, and stocks have struggled in recent months as Federal Reserve officials work to combat the surge by unwinding the central bank’s pandemic-era stimulus measures. After rising 27% in 2021, the benchmark S&P 500 has tumbled 8% this year. Meanwhile, oil prices have surged amid intensifying sanctions against Russia, one of the world’s top oil-producing countries, pushing gas prices to all-time highs last month. “Russia’s invasion of Ukraine complicates the economic outlook by fanning already heated inflation and forcing the [Fed]

What We Don’t Know

How high prices could go this year. Though they’re down about 20% from an early March high, oil prices are still up about 20% this year. “With much higher oil prices, the acceleration in inflation has further to run,” Zandi warns, pointing to China’s renewed problems with Covid-19 as another major risk factor and adding: “Double-digit CPI inflation later this spring is a stretch, but it can’t be ruled out.”

What To Watch For

How aggressively the Fed will act to combat inflation. The central bank’s next two-day policy meeting concludes on May 4, when officials are expected to announce how much they’ll raise interest rates.

This is a developing story. Please check back for updates.

Further Reading

Fed Official Suggests Central Bank Is Fueling Inflation By Not Raising Rates ‘Aggressively’ (Forbes)

This Recession Indicator Is Flashing Warning Signs As Fed, War And Oil Threaten Economic Recovery (Forbes)