US inflation accelerated in March to the fastest pace since mid-2022 as the Middle East conflict sent energy prices soaring.
The personal consumption expenditure price index rose 0.7% month over month in March, following a 0.4% gain in the prior month, the Bureau of Economic Analysis reported Thursday. The latest reading marked the highest since June 2022.
Gasoline and other energy goods prices soared 21% in March.
Energy prices have surged following the US-Israel war with Iran that has disrupted shipments through the crucial Strait of Hormuz. The conflict paused following a recent ceasefire between the US and Iran and later between Israel and Lebanon.
On a yearly basis, the PCE price index increased 3.5%, the biggest jump since May 2023 and accelerating from 2.8% in February.
The Federal Reserve's preferred inflation metric, which excludes food and energy, eased to 0.3% month over month in March from 0.4% in February. Annual growth accelerated to 3.2% from 3%.
All inflation prints met estimates in Bloomberg-compiled surveys.
"Inflationary pressures continued to percolate," Ksenia Bushmeneva, economist at TD Economics, said in a report. "The situation around the energy crisis remains uncertain and gas prices are likely to remain elevated for some time."
On Wednesday, the Fed kept its benchmark lending rate steady, saying the Middle East conflict is fueling uncertainty around the US economic outlook.
Personal consumption expenditures jumped 0.9%, as Wall Street expected. Inflation-adjusted real consumer spending increased by 0.2%, compared with expectations for a 0.3% increase.
"In the near-term, higher tax refund checks -- which are running about 11% higher than a year ago -- and lower income taxes will partially shelter consumers," Bushmeneva said. "However, going forward households may have to pull back on spending to offset higher gas prices and still-elevated inflation."