Iran War Pushes U.S. Inflation to Three-Year High, Fed Weighs Rate Hikes

Inflation rose in April, with the Fed’s preferred PCE price index up 3.8% year over year—the fastest since May 2023—and core inflation at 3.3%; monthly gains were 0.4% overall and 0.2% excluding food and energy. The war in Iran has disrupted energy markets, complicating price pressures and prompting more Fed officials to consider rate hikes to tame inflation, even as growth was revised downward and consumer spending cooled. The Fed’s leadership transition to Kevin Warsh adds to expectations that policy could tighten next year.