The Line: Fed’s Preferred Measure of Inflation 3% Higher than a Year Ago

Today, we’re all about inflation with the latest on PCE and CPI.

Fed’s Preferred Measure of Inflation 3% Higher than a Year Ago

As you loyal readers know, the Fed prefers the core personal consumption expenditures price index—AKA core PCE—to measure inflation, as it presents a more complete picture of prices and spending.

That said, this data is from February—they are still behind after the latest government shutdown—which means it’s pretty much useless. Any data on prices collected before the war in Iran should be ignored these days.

Let’s move on to CPI, since March’s data was released this morning.

Consumer Prices Up 3.3% Over the Past Year

The consumer price index rose 0.9% in March and was 3.3% higher than one year ago. Both these figures were in line with forecasts. Core CPI, which excludes food and energy prices, posted a much lower 0.2% monthly increase and is up just 2.6% from March 2025. This data was slightly below forecasts.

The biggest difference between these two numbers is gasoline prices, which rose 21.2% just last month. This wasn’t surprising, since the war in Iran has sent oil prices soaring. The BLS pointed out in its report that the jump in gas prices accounted for almost three quarters of themonthly increase in the headline number. March is a perfect example of why economists prefer “Core” data, as food and energy prices can be extremely volatile at times.

That said, it won’t take too much time for the jump in oil prices to impact the core inflation data. Everything we buy must be transported, and that takes oil. I’ve said many times in this blog that tariffs don’t cause runaway inflation, but that is not true for a spike in oil prices. And as we all know, prices rise much faster than they fall.

While the March CPI data wasn’t a surprise, it will keep the Fed from even saying the words “rate cut” for a while, especially after the much-better-than-expected March jobs report.  The markets don’t see any real chance of a rate cut until December. For you homebuyers out there, remember that the Fed’s actions have no direct impact on mortgage rates, which fell to an average of 6.37% this week.