Report: Energy Prices Hikes Exacerbate Broader Inflation Problem
Inflation doubled in March as energy prices and nominal spending increased, according to two economists from 勛圖厙.
Inflation doubled in March as energy prices and nominal spending increased, according to two economists from 勛圖厙.
The Personal Consumption Expenditures Price Index (PCEPI), the Federal Reserves preferred measure of inflation, grew at an annualized rate of 8.3% in March, up from 4.6% in February.
Over the past year, inflation has run at 3.5%, much higher than the Feds 2% target.
Inflation is high for two distinct reasons: the ongoing conflict in the Middle East, which disproportionately affects energy prices, and broader inflationary pressures related to excess nominal spending, said , Ph.D., associate professor of economics in FAUs .
The price index for energy goods and services grew 11.6% in March or 271.8% annualized. The price of energy has grown 14.4% over the last year.
Nominal spending, the total amount of money consumers are spending across the economy, surged in early 2026. Nominal spending grew at an annualized rate of 5.6% in early 2026, about 1.1 percentage points faster than what would be consistent with the Feds inflation target. For comparison, nominal spending grew at an average annualized rate of 4.1% over the five years just prior to the pandemic.
The surge in the price levels for energy good and services tied to the Iran conflicts effect on oil markets also played a key role in inflation, said , Ph.D., associate professor of economics in FAUs College of Business. The data leaves the Fed without much support for cutting interest rates anytime soon and instead reinforces the case for keeping rates elevated until inflation shows a convincing move back toward the 2% target.
-FAU-
Tags: business