Inflation is about to explode! March could be one of the months with the fastest price increases in the United States in decades.

Just as Trump agrees to a two-week U.S.-Iran ceasefire, the U.S. economy may also send a series of harsh warning signals later this week. For Trump and the White House aides around him, amid steadily declining polling support, “TACO” itself may have become the only viable path in front of them……

Industry insiders say that, as the Iran war pushes up gasoline prices, the U.S. CPI in March is likely to rise sharply, becoming one of the months with the largest inflation surge in history.

According to a media survey of economists, economists expect that the U.S. CPI report scheduled to be released on Friday will show that in March U.S. inflation rose 0.9% month over month.

This expected month-over-month increase in itself is a rather astonishing figure. Notably, since 1981, there have been only 16 instances in which the single-month price increase month over month was 0.9% or higher; this would also be the largest month-over-month increase since June 2022—when the U.S. CPI’s year-over-year increase had exceeded 9%.

On a year-over-year basis, economists forecast that this month-over-month increase will lead to a 3.3% year-over-year rise in the March CPI, which would also mark the highest level since April 2024.

If the CPI report ultimately released on Friday matches the above expectations, it will highlight the economic cost the U.S. has incurred from the U.S.-Iran war; the war has caused energy prices to jump sharply. The conflict has led to the closure of the Strait of Hormuz between Iran and Oman; this key waterway typically carries 20% of the world’s oil supply.

Over the past month or more, this geopolitical conflict has driven a surge in crude oil prices around the world, which in turn has pushed up gasoline and diesel prices. Within the five weeks since the outbreak of the war, the U.S. gasoline price per gallon has risen by more than $1. Economists say that as the war continues, the rise in energy prices will intensify further and may spread to other products as transportation companies pass higher fuel costs on to customers.

At present, the surge in gasoline prices has squeezed U.S. household budgets, forcing money to flow into other areas and weighing on consumer spending; and higher inflation is also forcing the Federal Reserve to keep the key policy rate at elevated levels for longer, thereby raising borrowing costs for all kinds of loans. Both of these trends are dragging down economic growth.

In a commentary, Jim Reid, head of macro research at Deutsche Bank, wrote, “The impact of the energy price shock will fully show up.”

Inflation expectations rise in tandem

What may be even more unsettling is that inflation expectations are rising in tandem. According to a survey released by the New York Fed on Tuesday, as the Middle East war broke out, consumers expected gasoline and food prices to rise, and in March short-term inflation expectations jumped by the largest amount in a year.

Based on the median of responses in the New York Fed’s monthly “Survey of Consumer Expectations,” U.S. consumers expect an inflation rate of 3.4% over the next 12 months, up 0.4 percentage points from February. The three-year inflation expectation rose slightly to 3.1%, while the five-year inflation expectation remained unchanged at 3%.

The survey was conducted from March 2 to March 31, reflecting that consumer pressure has increased after the first airstrikes against Iran by the U.S. and Israel. The war has caused oil prices to surge, bringing fresh upward pressure on inflation—over the past five years, the U.S. inflation rate has remained above the Federal Reserve’s 2% target.

Respondents said they expect gasoline prices to rise 9.4% over the coming year, up 5.3 percentage points from before the conflict, the highest level since March 2022. They expect food prices to rise 6% over the coming year, up 0.7 percentage points from the February survey.

Households are more pessimistic about their own financial situation, with the share of households that believe their financial situation has worsened compared with a year ago increasing. The share of households expected to see their financial situation worsen over the coming year also rose to the highest level since April 2025.

So far this year, Federal Reserve officials have kept the benchmark interest rate unchanged, and several policymakers said that the current rate level helps balance risks on both employment and inflation. According to labor department data released last week, after U.S. nonfarm payroll growth sharply slowed in February, March has shown a rebound.

However, the survey shows that consumers’ views on the labor market are mixed. On the one hand, respondents believe there is a greater chance that the unemployment rate will rise one year from now, and the risk of unemployment over the next year has also increased slightly. But people also believe that the chances of finding a job after becoming unemployed have improved.

Some Federal Reserve officials who are concerned that inflation remains high believe that the labor market is stabilizing and have hinted that the Fed may need to raise rates if inflation continues to stubbornly stay above the target level. However, among Fed decision-makers, those holding this view are still in the minority. Based on the pricing of federal funds futures contracts, investors currently broadly expect the Federal Reserve to keep the benchmark interest rate unchanged this year.

（Source: Caixin Finance and Economics）