US inflation seen spiking in first snapshot since Iran war
(Bloomberg) — The sudden increase in US gasoline prices felt by American consumers is set to be on full display in key inflation data due out this coming week.
Economists are penciling in a 1% increase in the consumer price index for March — the sharpest one-month advance since 2022 — after the Iran war pushed gas prices at the pump up by about $1 per gallon.
At the same time, the core CPI, excluding energy and food, probably rose 0.3% from a month earlier, according to a Bloomberg survey ahead of the Bureau of Labor Statistics report due Friday.
Oil prices have been roiled by five weeks of conflict, climbing to almost $120 a barrel last month as key Middle East energy assets came u nder attack and Iran effectively closed the critical Strait of Hormuz, creating what the International Energy Agency called the biggest supply disruption in the history of the market.
OPEC+ warned on Sunday that damage to Middle East energy assets will have a prolonged impact on oil supply even after the Iran war ends, as it approved a symbolic increase in output quotas for next month.
A day ahead of the CPI, the Federal Reserve’s preferred gauge of inflation will offer a snapshot of pre-war price pressures. Economists see the so-called core personal consumption expenditures — PCE — price index, which excludes food and energy, having risen by 0.4% for a third month in February, suggesting progress toward tamer inflation was stalling even before the conflict.
Combined with signs of stabilization in the US labor market, stubborn price pressures along with new inflation risks stemming from war in the Middle East help explain why the Fed may struggle to lower interest rates this year.
“March’s gangbuster payrolls print and lower unemployment rate certainly don’t boost the case for the Fed to resume cutting rates anytime soon. Data this coming week also won’t likely make the case for rate reductions.”
—Anna Wong, Stuart Paul, Eliza Winger, Chris G. Collins, Alex Tanzi & Troy Durie.
The mid-week release of minutes from the central bank’s March policy meeting may shed light on officials’ concerns about inflation or the potential economic impacts stemming from the Iran conflict and related disruptions to energy and other commodity flows.
In addition to the PCE price data, the Bureau of Economic Analysis’ report will include figures on personal spending as well as incomes. Economists expect a modest increase in inflation-adjusted spending.
Other reports in the coming week include the Institute for Supply Management’s March services activity index, due on Monday. And on Friday, the University of Michigan will issue its preliminary April consumer sentiment index.
In Canada, the March labor force survey will offer a first look at how surging energy costs may be filtering through to job growth and unemployment. Economists expect the jobless rate to tick up to 6.8%.
Elsewhere, central banks from Poland to India and New Zealand may keep policy steady as they monitor events in the Middle East, while inflation gauges from China to Latin America will point to the impact on living costs.
Asia gets three rate decisions this week, with the focus falling on how authorities assess risks to prices and growth from the Middle East conflict.
The Reserve Bank of New Zealand is expected to hold its cash rate at 2.25% on Wednesday for a second straight meeting after Governor Anna Breman said she won’t rush into raising the benchmark in response to the Iran war.
Pricing in the overnight swaps market shows traders see a roughly 58% chance of an increase by the meeting in July, though economists see a longer hold.
On the same day, India’s Reserve Bank is forecast to keep its repurchase rate steady at 5.25%, while on Friday, the Bank of Korea — in the final meeting of Governor Rhee Chang Yong’s tenure — is all but certain to keep settings unchanged as well.
Data highlights include inflation updates from the Philippines, Thailand and Taiwan. China’s key inflation gauges for March, due Friday, will likely reflect the impact of soaring energy costs.
Consumer inflation may accelerate again after picking up to the fastest pace in three years in February. Likewise, factory-gate deflation may narrow further after registering the slowest clip in more than a year in the previous month.
Japan releases wage data for February on Wednesday, with a focus on the inflation-adjusted gauge after it turned positive in January for the first time in more than a year.
Singapore releases retail sales figures for February on Monday, and New Zealand’s manufacturing PMI for March is due Friday.
Multiple euro-region industrial reports will draw attention, although their focus on February — before war began in the Middle East — may limit their utility for investors.
German factory orders on Wednesday, followed by production and export numbers on Thursday, will offer a glimpse of manufacturing in Europe’s biggest economy at a time when the flow of defense-focused stimulus is building.
Those two days will also feature French export numbers and Spanish production data, followed by Italian factory statistics on Friday.
Appearances by euro-zone central bankers and Bank of England policymakers will be sparse during a week shortened by the Easter holiday.
Inflation numbers from several economies will draw attention, highlighting how the energy squeeze in the Gulf is impacting consumers. Last week’s euro-zone reading showed the biggest jump since 2022.
Reporting from the Nordics are Sweden on Tuesday and Norway on Friday, both of which may have experienced accelerating price growth.
Hungary’s inflation on Wednesday is also seen quickening notably above 2%, in a report arriving just days before the country’s highly anticipated election.
On Thursday, Egypt’s consumer-price growth is expected to show another uptick from the 13.4% level in February, after energy costs soared and the pound fell to a record low.
A number of monetary decisions are scheduled:
On Tuesday, Romania’s central bank is expected to keep its rate at 6.5%, the highest in the European Union.
Kenya will probably maintain its benchmark at 8.75% on Wednesday as officials gauge the impact of the Iran war. That’s after easing policy with 10 cuts — a cumulative reduction of 425 basis points — since August 2024.
Polish policymakers are set to keep borrowing costs steady on Thursday after pushing through with a cut in March, as they shift to wait-and-see mode.
Serbia’s central bank, which has held its rate steady since 2024, will reveal its latest decision the same day.
Central banks and March consumer price reports from some of the region’s big economies take center stage, offering a glimpse of the Iran war’s expected inflation shock.
The early consensus sees consumer price pressure rising in all four economies reporting in the coming week — Brazil, Chile, Colombia and Mexico.
Colombia watchers will be eager to pore over the minutes of BanRep’s latest meeting, at which where policymakers delivered a second straight 100 basis-point hike.
The split decision — four board members backed the hike, two voted for a 50-basis-point cut, and one wanted no change — pushed the key rate up to 11.25% and prompted Finance Minister German Avila to walk out in protest.
Analysts surveyed by Bloomberg now see a terminal rate of 12% for Colombia and don’t expect any easing until the third quarter of 2027.
Monetary policy meeting minutes are also on tap in Mexico. Banxico on March 26 delivered a quarter-point cut to put the key rate at 6.75% while also revising up inflation expectations — raising some eyebrows, legitimate concerns about growth notwithstanding.
In Peru, central bankers at their monthly rate meeting will be sorely tested by March’s huge jump in consumer prices — the month-on-month reading of 2.38% was the highest in the series dating to 1994 — driven in no small part by the Iran war’s oil shock.
Still, the early consensus sees the board, led by bank chief Julio Velarde, choosing to see where the Iran conflict and consumer price pressures stand by this time next month, rather than tighten here.
—With assistance from Beril Akman, Brian Fowler, Laura Dhillon Kane, Monique Vanek, Robert Jameson, Mark Evans, Piotr Skolimowski and David Herbling.
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