US inflation surges to three-year high amid tensions with Iran | Inflation News
U.S. Inflation Hits Three-Year High Amid Rising Energy Costs
Published May 28, 2026
Inflation in the United States surged to its fastest rate in three years, driven by escalating energy prices in the wake of the ongoing conflict between the U.S. and Israel on one side and Iran on the other.
The Personal Consumption Expenditures Price Index (PCE), the Federal Reserve’s key inflation gauge, recorded a 3.8% increase in April, up from a 3.5% rise in March, according to a report released Thursday by the Department of Commerce’s Bureau of Economic Analysis.
Month over month, the PCE rose by 0.4% in April, following a 0.7% increase in March. Overall, goods prices increased by 0.7%, with a notable 5.5% rise in petrol prices. The average cost of a gallon of gasoline reached $4.42, up from $4.17 in March and significantly higher than $2.98 on February 28, the day the U.S. and Israel initiated actions against Iran.
Food prices also saw a rise, increasing by 0.5%—the largest monthly jump since November 2022. Additionally, housing and utility costs rose by 0.6%, while consumer spending increased by 0.5%, easing from a 1% rise in March. The savings rate also fell to 2.6% as more consumers began utilizing their savings.
Federal Reserve Faces Pressure
This uptick in inflation adds pressure on the Federal Reserve ahead of its first policy meeting under new Chair Kevin Warsh, scheduled for June 16-17. The Fed aims to achieve a 2% inflation target and closely monitors PCE inflation.
Olu Sonola, head of U.S. economics at Fitch Ratings, stated, “The inflation picture is becoming increasingly uncomfortable for the Fed. Price pressures are likely to persist over the next few months. While the Fed cannot fix a supply shock, it cannot ignore one that is contributing to underlying inflation.”
Analysts anticipate that the Federal Reserve will maintain interest rates in the range of 3.50% to 3.75% well into 2027, with a JPMorgan Chase analysis suggesting that a rate hike, rather than a cut, is likely to occur mid-year.
Minutes from the Fed’s April 28-29 meeting indicated that policymakers are leaning toward increasing rates.
U.S. financial markets have shown resilience despite the inflation report. The Nasdaq Composite gained 0.6%, and the S&P 500 rose by 0.5%, while the Dow Jones Industrial Average remained nearly unchanged, up just 0.05% in midday trading.
The White House did not respond to a request for comment from Al Jazeera.
