US inflation climbed in March as oil prices jumped amid the Iran war, even as economic growth slowed from some expectations and jobless claims hit a decades-low — a mix of conflicting signals for policymakers.
The core Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve’s preferred inflation measure, increased 0.3% month-on-month and pushed the annual core rate to 3.2%, the highest since November 2023, Commerce Department data showed. The reading matched consensus forecasts.
Including food and energy, the headline PCE rose 0.7% for the month, lifting the year-on-year rate to 3.5%, driven largely by a sharp surge in energy costs tied to recent oil market volatility.
Economic growth moderated relative to expectations. Gross domestic product expanded at an annualised 2.0% in the first quarter, up from 0.5% in the prior quarter but slightly below the 2.2% analysts had expected.
The labour market remains tight: initial jobless claims fell to 189,000 for the week ended April 25, the lowest level since September 1969, underscoring continued strength in hiring despite other mixed indicators.
“This is a split-screen economy,” Heather Long, Chief Economist at Navy Federal Credit Union, told CNBC International. “Companies and investors involved in AI are on fire. Meanwhile, middle and moderate income households are struggling with high gas prices and inflation that’s back at the hottest level in three years.”
The March inflation pickup was concentrated in goods, which rose 1.4% for the month, including an 11.6% jump in energy-related categories. Services inflation was more subdued, rising 0.3%.
Higher fuel costs appeared to weigh on consumer behavior. Personal consumption expenditures climbed 1.6% overall, while spending on goods dipped 0.1%. A key gauge of underlying demand — real final sales to private domestic purchasers — increased 2.5%.
Government spending also contributed to growth, rising 4.4% overall and climbing 9.3% at the federal level.
The data arrived a day after the Federal Reserve left interest rates unchanged. FOMC deliberations showed some dissent, highlighting divisions over the policy path as inflation remains above target while the labour market shows resilience.
First published: Apr 30, 2026 7:13 PM IST