Inflation likely to spike in coming months after tame February reading
[March 11, 2026] By
CHRISTOPHER RUGABER
WASHINGTON (AP) — Inflation likely was elevated last month even before
the spike in oil and gas prices of the past two weeks that is expected
to send consumer costs soaring in the months ahead.
Consumer prices are forecast to have risen 2.5% in February from a year
earlier when the Labor Department reports last month's figures
Wednesday, according to a survey of economists by data provider FactSet.
That would be up slightly from 2.4% in the previous month. Core prices,
which exclude the volatile food and energy categories, are expected to
have also risen 2.5% in February, matching January's figure for the
lowest in five years.
But the data will represent an already-faded snapshot of inflation
before the Iran war was launched Feb. 28, which has caused violent
gyrations in oil prices as shipping lanes through the Persian Gulf have
suffered a rare shutdown. Gas prices have already jumped and are
expected to push inflation much higher when March figures are released
next month.
The price spike will unnerve the inflation fighters at the Federal
Reserve and could slow consumer spending and weigh on the broader
economy. The increase could be a one-time event and potentially reverse
if the war ends soon, as President Donald Trump has hinted. But the
spike in gas prices threatens to worsen inflation for at least a few
months even as Americans are already weary from nearly five years of
stubbornly high prices that have made “affordability” a thorny political
issue for congressional Republicans who will soon face voters in midterm
elections later this year.
Oil prices soared as high as nearly $120 a barrel late Sunday before
rapidly falling back Monday after Trump suggested that the conflict
would be a “short-term excursion.” Still, he has also threatened ongoing
attacks and it isn't clear when the conflict might end.
Some analysts warn prices will move much higher if the Strait of Hormuz
remains closed, which has removed roughly three-quarters of the Persian
Gulf region's oil production from world markets, according to Wood
Mackenzie, an energy analytics firm. Oil prices could soar to $150 a
barrel in the coming weeks, the firm forecasts, if shipments don't
resume.
That would push gas prices still higher in the United States, where they
jumped to $3.54 a gallon on average nationwide Tuesday, according to
AAA, an increase of about 20% just in one month.
Over time, higher gas prices will lift some other costs as well,
including air fares and shipping costs, which could make groceries and
restaurant meals more expensive.
At the same time, given the ups-and-downs of oil prices — U.S. crude
prices fell nearly 9% to $86.55 Tuesday afternoon — it is difficult to
forecast how big the impact will be over time. If shipments resume in a
week or so, gas prices will likely decline fairly soon, though they
typically fall much more slowly than they rise.
Laura Rosner-Warburton, senior economist at MacroPolicy Perspectives, a
consulting firm, expects inflation could jump by as much 0.8% or 0.9%
just in March from the previous month, when that data is reported next
month. It would be the largest monthly gain in nearly four years. Yearly
inflation could easily surpass 3% in that case and potentially near 4%
in the following months.
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Gas prices are displayed, Monday, March 9, 2026, in Los Angeles. (AP
Photo/Damian Dovarganes)
 By comparison, overall prices are
projected to climb just 0.3% in February from the previous month.
The jump in gas prices so far this month has been the largest since
March 2022, and before that since June 2009, Rosner-Warburton said.
“That is enormous,” she said. “Increases of that magnitude are
highly unusual.”
Core prices will be much less affected this month, but could tick
higher over time as more expensive gas pushes up airline fares and
other transportation costs. Core inflation is expected to have
increased 0.3% in February from the previous month.
Even if the sharp rise is short-lived, it will almost certainly
delay any interest-rate cut by the Federal Reserve, which meets next
week. It cut its key rate three times last year before leaving it
unchanged at its last meeting in January.
The Fed is already deeply divided over whether it needs to keep its
rate at its current level of about 3.6% to push inflation down
closer to its 2% goal, or whether it should reduce the rate to
support borrowing, spending, and hiring.
Last Friday, the government reported an unexpectedly sharp job loss
in February, as employers slashed 92,000 jobs and the unemployment
rate ticked up to a still-low 4.4% from 4.3%.
The weak jobs report puts the Fed in an especially difficult
position: It would normally reduce rates to boost growth and hiring,
but it typically raises rates — or at least keeps them where they
are — if they are worried about inflation.
“That's always the worst-case scenario for the central bank,” said
Austan Goolsbee, president of the Federal Reserve Bank of Chicago,
on Bloomberg Friday. "As we get more uncertainties, I kind of think
that the time at which it makes sense to act keeps getting pushed
back.”
Gregory Daco, chief economist at EY-Parthenon, a consulting firm,
said that normally the Fed would expect an oil price shock to have
at most a temporary impact on inflation and might still cut rates if
the economy needed lower borrowing costs.
But Fed policymakers were burnt just a few years ago when they
initially said the post-COVID inflation spike in 2022-23 — the worst
in four decades — would be temporary, Daco said. As a result, they
will be reluctant to take the risk of prematurely lowering rates. A
few officials even mentioned during the January meeting that they
might have to hike rates soon, rather than cut them, according to
the meeting's minutes — and that was before the Iran war.
“They do not want to be burned again,” Daco said.
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