Inflation surges to hottest level in nearly three years as Iran war raises prices

Inflation heated up in April to the hottest level in three years as the Iran war drove energy prices higher, and started to filter through the economy – likely keeping the Fed on hold when it comes to interest rates.The Consumer Price Index jumped 3.8% in April over the past 12 months – higher than an expected 3.7% increase and the highest headline rate since May 2023, the Bureau of Labor Statistics said Friday.As the Iran war disrupts global energy supplies and sends prices soaring, the headline figure is no longer inching toward the Fed’s 2% goal – instead rising sharply from March’s 3.3% gain and February’s 2.4% pace.The core CPI figure – which excludes volatile food and energy prices – rose to 2.8% from March’s 2.6% reading, signaling it’s not just gasoline driving the increase.Skyler Weinand, chief investment officer at Regan Capital, said recent inflation and employment data suggests the Fed’s next move should actually be an interest-rate hike – but that is very unlikely given “the political pressure” facing incoming chairman Kevin Warsh. Instead, the Fed is likely to stay in wait-and-see mode as officials look for more insight into how the war is hitting the economy, and President Trump pushes for rate cuts.“The first order effect from the conflict in the Middle East have been a shock to oil prices, which have translated very quickly to what consumers are paying at the pump, but the next frontier to watch is rising input prices for food and materials, and that makes the Federal Reserve’s job even tougher,” Weinand said in a note Tuesday.Sign up to receive On The Money by Charlie Gasparino in your inbox every Thursday.

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Never miss a story.The energy index jumped 3.8% in April – accounting for more than 40% of the overall inflation reading.

Energy prices are up 17.9% over the pa...