US: Inflation upturn with oil shock – Commerzbank

Commerzbank economists Dr. Christoph Balz and Dr. Ralph Solveen argue that higher Oil prices from the Iran War are set to push US inflation higher. They expect March CPI to rise 0.9% month-on-month and 3.3% year-on-year, with core at 0.3% and 2.7%. They see CPI’s downtrend ending and PCE inflation already elevated.

Oil-driven CPI shock and Fed focus

“The energy price shock has been evident at U.S. stations since early March, and next week, when consumer price statistics are released, they will reveal for the first time just how much overall price levels in the U.S. have risen. Gasoline is likely to be the biggest driver of inflation; adjusted for seasonal fluctuations, it has risen by about 20% from February.”

“Overall, we expect U.S. consumer prices to have risen by 0.9% in March compared to February and by 3.3% from March 2025. In February, the year-on-year rate stood at 2.4%. Excluding energy and food (“core rate”), we expect a 0.3% increase month-on-month and a 2.7% increase year-on-year.”

“This would likely mark the end of the downward trend in inflation as measured by consumer prices (CPI). In our main scenario of a war lasting until the end of May, inflation is likely to rise to nearly 4% in the coming months. In any case, we have already pointed out on several occasions that consumer prices understate inflation risks.”

“And the PCE inflation rate, which is typically slightly lower than the CPI inflation rate, stood at 2.8% (headline rate) and 3.1% (core rate) even before the energy price shock.”

“Because the central banks are not tackling inflation vigorously enough, it is likely to remain above 2% longer term.”

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