What we covered here
• Inflation spikes: The war with Iran drove up monthly US inflation threefold in March, according to the latest Consumer Price Index report, released this morning.
• The numbers: The annual rate of inflation reached 3.3% in March, up from 2.4% in February. The monthly rate measured 0.9%, according to the Bureau of Labor Statistics.
• Effects of Iran war: The price spike was overwhelmingly driven by spiraling energy costs from the chokehold that Iran has on global oil supply. Gasoline rose by a record 21.2% last month.
• Consumers sour on economy: Frustration with higher prices pushed consumer sentiment to a historic low, below anything recorded during the Great Recession or the Covid pandemic.
Our live coverage of the March CPI inflation report has ended. Read more about today’s news here.
Stocks close mixed but post best weekly gains so far this year
US stocks closed mixed Friday as traders digested the sharp rise in headline inflation and record-low consumer sentiment, while awaiting US-Iran talks this weekend.
The Dow fell 269 points, or 0.56%. The S&P 500 fell 0.11%, ending a seven-day winning streak. The tech-heavy Nasdaq gained 0.35%.
The Dow and S&P 500 lost steam Friday but posted strong weekly gains of 3.61% and 3.56%, respectively. It was the Dow’s best week since June and the S&P’s best since November. The Nasdaq gained 4.68% this week and also had its best week since November.
Stocks soared earlier this week on relief about the US-Iran ceasefire and a drop in oil prices. The rally helped the three major indices recoup some losses from across the past month. The S&P 500 is down less than 1% since the war began.
Oil prices moved lower Friday to cap off a volatile week. WTI, the US benchmark, fell 1.33%, to $96.57 per barrel. US crude sank 13.4% this week, posting its biggest weekly loss since April 2020.
Brent crude fell 0.75% Friday to settle at $95.20 per barrel, down nearly 12.7% on the week for its biggest weekly loss in 10 months. Both WTI and Brent remain well above their pre-war levels of $67 and $73 per barrel, respectively.
“Markets have grown calmer in recent days as Middle East tensions have eased, but investors remain focused on whether that shift proves durable,” Eric Freedman, chief investment officer at Northern Trust Wealth Management, said in a note.
The tariff refund process finally has an official start date
Since the Supreme Court ruled President Donald Trump’s most sweeping tariffs were illegal in February, importers who have paid $166 billion to cover those levies have been anxiously awaiting answers on how they can receive the refunds, which the administration was ordered to distribute.
US Customs and Border Protection, which collects tariff revenue, said the first phase of a new system aimed at automating the refund process will go live on April 20.
The program, called the Consolidated Administration and Processing of Entries (CAPE), “is designed to consolidate refunds of IEEPA duties including interest rather than processing refunds on an entry-by-entry basis,” CBP said Friday in a notice.
For the first phase, only entities who have made certain tariff payments will be able to make refund submissions. It’s unclear when the system will open for all payments subject to refund. It’s also unclear how long it will ultimately take for importers to get the funds back.
Trump's tariffs face a new legal battle
After the Supreme Court rendered President Donald Trump’s most sweeping tariffs illegal, he put in place a 10% duty across nearly all imports, citing a different law.
But his use of that law, Section 122 of the Trade Act of 1974, which allows a president to impose tariffs up to 15% for 150 days without Congressional approval, is being challenged by a group of 24 Democratic-led states and two small businesses.
At the conclusion of an over three-hour hearing at the Court of International Trade, it was unclear whether the three judges presiding in the case were more likely to rule in favor of the plaintiffs or the Trump administration. Both sides’ arguments faced, at times, strong pushback from the judges.
What remains clear: The administration’s alternative to the overturned tariffs isn’t surefire, either.
Here's how much last month's surge in gas prices could cost consumers
The war with Iran and the stranglehold on oil from Gulf nations resulted in a 21.2% surge in gas prices last month.
That’s the largest monthly increase recorded since 1967, according to fresh Consumer Price Index data released Friday.
March’s jump in gas prices translated to an 18.9% annual increase in gas prices.
Gas prices are expected to only continue to increase the longer the war goes on. But assuming gas prices were to stay at last month’s levels, how much more would it cost consumers?
Taking into account Bureau of Labor Statistics data capturing various tiers of pre-tax household income levels and the shares they spend on gas, here’s how that looks:
- Household income below $30,000: An extra $223 on gas annually. On average, households in this group spend 7.1% of their income on gas.
- Household income between $30,000 and $57,500: An extra $357 on gas annually. On average, households in this group spend 4.4% of their income on gas.
- Household income between $57,500 and $94,500: An extra $461 on gas annually. On average, households in this group spend 3.3% of their income on gas.
- Household income between $94,500 and $156,000: An extra $578 on gas annually. On average, households in this group spend 3.3% of their income on gas.
- Household income greater than $156,000: An extra $658 annually. On average, households in this group spend 1.3% of their income on gas.
Bank CEOs huddled with Bessent and Powell on risks linked to Anthropic’s new AI model
Treasury Secretary Scott Bessent and Federal Reserve Chair Jerome Powell called America’s top bankers to a meeting in Washington this week to discuss risks posed by Anthropic’s cutting-edge artificial intelligence model, a person familiar with the matter confirmed to CNN.
The meeting, held on Tuesday at the US Treasury Department, focused on the cybersecurity concerns raised by Anthropic’s Mythos model, the source said.
The new AI model has not yet been publicly released because of fears it could be abused by spies and cybercriminals, according to Anthropic.
However, Anthropic, one of the nation’s leading AI labs, has granted JPMorgan Chase, Amazon, Apple and other companies access to Mythos for cyber defense purposes, including finding bugs in their own software.
Anthropic briefed senior US government officials and key industry stakeholders on the model’s capabilities, including its offensive and defensive cyber applications, a person close to Anthropic told CNN.
“Securing critical infrastructure is a top national security priority for democratic countries—the emergence of these cyber capabilities is another reason why the US and its allies must maintain a decisive lead in AI technology,” Anthropic said in a blog post this week.
The bank executives summoned to the meeting included the CEOs of Bank of America, Wells Fargo and Goldman Sachs, the person said, noting that many of the bank executives were already planning to be in Washington for an unrelated event.
News of the high-level meeting with Powell and Bessent was previously reported by Bloomberg.
Representatives from the major banks, the Fed and Treasury Department did not provide a comment.
Powell warned in 2021 that cyberattacks are the leading threat to the global financial system, even more so than a 2008-style banking crisis.
Wall Street wraps up strong week on a quiet but cautious note
US stocks were mixed Friday afternoon after hot headline inflation data and a record-low consumer sentiment reading confirmed the war with Iran is squeezing Americans’ wallets.
The Dow was down 315 points, or 0.65%. The S&P 500 fell 0.2%, dipping into the red after rising earlier. The tech-heavy Nasdaq was up 0.2% but pared earlier gains.
Uncertainty lingers about the fragile US-Iran ceasefire. The S&P 500 was set to snap a seven-day win streak. Despite dipping lower Friday, the S&P 500 was still up 3.5% on the week and set for its best week since November. Wall Street rallied earlier this week on optimism about the ceasefire and a drop in oil prices.
Brent crude, the global oil benchmark, is down 11% this week, its biggest weekly loss in nearly 10 months — but remains well above its pre-war level. Brent was up 1% Friday to $97 per barrel, ticking higher ahead of US-Iran talks this weekend.
“Whether the US-Iran talks will yield meaningful results remains unclear,” Ulrike Hoffmann-Burchardi, global head of equities at UBS Global Wealth Management, said in a note.
Where Trump's tariffs are showing up for consumers
It’s been a year since President Donald Trump announced markedly higher tariffs on so-called “Liberation Day.” While inflation didn’t accelerate as much as economists initially anticipated, in part because the original levies he introduced were revised so many times, several tariff-sensitive goods have seen significant price increases over the past year.
For more on how the impact of higher tariffs is being felt throughout the US economy, check out CNN’s tariff tracker.
How companies are passing on higher oil prices to consumers
After weeks of war-driven pressure on fuel prices and supply chains, some businesses are starting to pass those higher costs along to consumers via new fees — or through other, less obvious changes.
American Airlines, Delta Air Lines, JetBlue, Southwest and United Airlines have all raised checked baggage prices as a way of offsetting higher energy costs, and more airlines are likely to follow their lead.
United CEO Scott Kirby also warned recently that certain routes will be eliminated over the next two quarters as a form of cost cutting.
The cost of shipping goods by rail, air, road and sea has also increased since the war with Iran broke out, with shipper directly passing on higher fuel prices to customers.
Read more here.
Concerns about stagflation are growing. Here's what that means
Concerns have been mounting that the US economy could soon experience an ugly economic phenomenon: stagflation; aka, when economic growth significantly slows and inflation accelerates.
Those concerns have been front and center since the war with Iran broke out, pushing energy prices higher while cracks in the labor market are widening. Additionally, the abrupt Arab oil embargo in the 1970s is precisely what ushered in stagflation.
But Federal Reserve Chair Jerome Powell said at last month’s monetary policy meeting he isn’t worried.
“I would reserve the term stagflation for a much more serious set of circumstances. That is not the situation we’re in,” Powell told reporters.
What about tariffs?
“We almost forget the tariffs, because we’re all paying attention to the gas,” Heather Long, chief economist at Navy Federal Credit Union, told CNN. “But it’s a good reminder that part of the issue here is we’re piling on top of what was already rising.”
Here’s where tariff-related inflation is still showing up in consumer pricing:
- Toys, a category heavily reliant upon imports, increased 2.3% in March. That’s the largest monthly gain in nearly five years.
- Tools and hardware went up 1.4%, the largest increase since October 2022.
- The cost to service vehicles was up 1.4%, the largest since September 2022.
- Apparel, another category of goods the US imports, saw prices increase 1% last month. For the 12 months ended in March, prices are up 3.4%, the largest annual increase since May 2023.
Consumer sentiment plummets to record low
Americans are souring on the economy as the US-Israeli war with Iran pushes up inflation, prompting consumer sentiment to plummet to its lowest level on records going back to 1952.
The University of Michigan’s latest consumer survey released Friday showed that sentiment declined 11% early this month to a reading of 47.6, lower than anything seen in the post World War II era, including during the Great Recession, the pandemic downturn and the historic inflation surge afterward.
“Open-ended comments show that many consumers blame the Iran conflict for unfavorable changes to the economy,” Joanne Hsu, the survey’s director, said in a release.
“Demographic groups across age, income, and political party all posted setbacks in sentiment, as did every component of the index, reflecting the widespread nature of this month’s fall,” she added.
Read more here.
White House touts egg prices
The Trump administration has acknowledged that rising oil and gas prices because of the war with Iran would send inflation higher. But it has repeatedly said a weakened Iran will be worth the cost.
On Friday, the White House opted for a different message: Other prices are falling.
“Although gas and energy prices are seeing volatility, prices of eggs, beef, prescription drugs, dairy, and other household essentials are falling or remain stable thanks to President Trump’s policies,” said White House spokesperson Kush Desai in a post on X.
Desai is right: Egg prices have fallen 44.7% over the past year as the industry recovered from the avian flu epidemic that had sent prices of a dozen eggs into the double digits. Meat edged 0.6% lower last month but prices remain high – and have risen 6.8% over the past year.
Overall, grocery prices fell 0.2% last month but remain 1.9% higher over the course of the year.
Desai also noted that US oil production remains robust and tax cuts will help pad consumers’ bank accounts.
“As the Administration ensures the free flow of energy through the Strait of Hormuz, the American economy remains on a solid trajectory thanks to the Administration’s robust supply-side agenda of tax cuts, deregulation, and energy abundance.”
But the average increased tax refund is $351 this year, compared to last year. The annual increase in gas prices will cost households $190 a month in added costs, according to Andy Lipow, president of Lipow Oil Associates.
Affordability is now further out of reach than before the war
The cost of living remains Issue No. 1 for US voters in poll after poll. Today’s inflation report shows that America’s affordability problem is getting worse because of the war.
Inflation has been a persistent thorn in the economy’s side since the post-pandemic economic boom, Ukraine-Russia war and snarled supply chain sent prices rocketing higher starting in 2021. Price increases have cooled off dramatically in the past few years, but inflation still hasn’t returned to pre-pandemic levels.
Americans haven’t yet adjusted to higher prices. And now, inflation is surging again.
So it’s alarming to see a sharp increase like this in the first four weeks of the war. What we’ve seen in the March report is really just the first-order effects of an inflation rebound that could last for months.
Eventually, higher energy costs will bleed through into all kinds of other things that feed into this inflation number: food, airfares and all the other items that are made with crude and crude byproducts. Everything that’s made with plastic, everything that is delivered on a truck… it’s a lot of stuff.
It could be months before the full effect of this is felt. And energy prices are stubborn: They rise faster than they fall.
Wall Street shrugs off latest inflation report
US stocks opened little changed Friday morning after data showed inflation surged in March but was in line with forecasts.
The Dow fell 41 points, or 0.1%. The S&P 500 rose 0.26% and the tech-heavy Nasdaq gained 0.5%.
The S&P 500 is up for the eighth day in a row as a relief rally has taken place on Wall Street. Developments in the Middle East and the state of the US-Iran ceasefire are in focus.
While the Iran war and oil shock have sent energy prices soaring, a measure of inflation excluding food and energy prices rose 0.2% month over month in March.
Investors have been adjusting their expectations for inflation because of the spike in oil prices, so the report was expected to be hot. Treasury yields ticked higher.
“When paired with the February PCE data we received yesterday, the message is clear: inflation remains sticky,” Bret Kenwell, US investment analyst at eToro, said in a note.
Traders are fixated on whether the fragile ceasefire can hold and if oil tankers will be able to transit the crucial Strait of Hormuz.
This is just the start of an inflation rebound — even if the ceasefire holds
The trouble with economic data is that it is backward looking. Today’s inflation report is actually March’s inflation report.
But we can learn from our past experience with oil shocks to figure out what comes next. It’s not pretty.
Even in the most optimistic of scenarios, where the ceasefire agreement between the United States and Iran holds and the Strait of Hormuz reopens, consumer prices will remain high and inflation will almost certainly continue to gain for months.
That’s because oil shocks have both an immediate and a delayed effect on overall prices: Gas prices shoot higher right away, but other prices rise later as higher energy prices work their way through the economy.
For example, grocery prices fell in March, even as the cost of diesel surged. Eventually, higher diesel prices will send food prices higher, because shipping companies will charge supermarkets more to deliver groceries. Food prices typically take three to six months after the initial shock to gain.
Other items also act with a lag.
And gas prices also will remain high for quite some time, even if crude prices have peaked and start to fall in the coming days – a big if, because traffic through the strait has remained at a crawl. Gas stations act slowly to lower prices, because it takes time for lower-priced crude to get refined, warehoused and shipped to stations. Station owners make thin profits, and they resist lowering prices.
What the latest inflation data means for the Fed and interest rates
The US-Israeli war with Iran jacked up inflation in March, but Federal Reserve officials still want to see the situation play out for a little bit first, according to their latest speeches. Many also believe the price shock may be temporary.
That means interest rates are expected to remain unchanged over the next two meetings, slated for later this month and June, Wall Street’s expectations show.
After that, however, it is possible the Fed could hike rates, especially if inflation pressures spread beyond energy and push up so-called core inflation. Several officials even wanted to note the possibility of a rate hike in their policy statement from March, according to minutes from that meeting released earlier this week.
However, Fed Chair Jerome Powell said earlier this month that “the tendency is to look through any kind of a supply shock.” He added that the Fed’s reaction function is largely centered on Americans’ expectations for inflation in the next five to 10 years, which haven’t surged.
Follow inflation's recent trajectory
Ripple effects from the Iran war, which began in late February, set back progress on inflation in March. However, underlying inflation, which excludes energy prices, held steady.
War raises prices more quickly than tariffs
Businesses for the past year have been bearing the brunt of higher tariffs by absorbing the majority of the cost without raising prices significantly. But that means they have even less wiggle room to assume higher transportation costs.
That means consumers are poised to see prices rise a lot more quickly than they have from tariffs, especially because energy is one of the biggest expenses for businesses.
Gasoline rose by a record 21.2%
Sharply rising gas and energy prices were the biggest contributor to March’s jump in inflation.
Gasoline prices, which rose a record 21.2% during the month, accounted for nearly three-quarters of the overall monthly increase.
“There’s been bigger energy price shocks in total, but they’ve rippled through over several months,” Samuel Tombs, chief US economist at Pantheon Macroeconomics, told CNN ahead of the report. “This just came through in one month.”
“The energy price shock will take many months to play out to other parts of the economy,” Tombs said. “Goods prices won’t change immediately, but after three to six months, you tend to see energy price changes filter through to consumers.”
This post has been updated with new numbers from the CPI data release.
