Core CPI came in at 2.6% YoY / +0.2% MoM — essentially in line with pre-war trends, which tells you that underlying demand-side inflation is still fairly contained. The 3.3% headline is almost entirely an energy story: gasoline alone accounted for roughly 75% of the monthly CPI increase, with Brent crude spiking from ~$70/barrel before the conflict to $118 by the end of March (currently back down to ~$96 following the ceasefire announcement).
The more interesting debate for the April and May data is the secondary transmission. Diesel feeding into trucking → food costs, jet fuel → airfare (already +14.9% YoY), fertilizer exports through Hormuz → agricultural input costs. Amazon just announced a 3.5% fuel surcharge on third-party sellers starting April 17. These don’t show up in the March CPI at all.
The Fed’s position is genuinely uncomfortable. At their March meeting, they were still penciling in one cut this year, but framed it as needing to stay “nimble.” A sustained supply shock that keeps headline CPI elevated while core stays moderate is the worst-case scenario for them — you can’t really rate-hike your way out of a war-driven oil shock without torching demand unnecessarily.
J.P. Morgan’s framing is worth flagging: if the ceasefire doesn’t hold, their economists called it potentially “the largest oil supply shock in post-World War II history.” The two-week ceasefire is the hinge point — the Strait appears to still be largely blocked even now.
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Core CPI came in at 2.6% YoY / +0.2% MoM — essentially in line with pre-war trends, which tells you that underlying demand-side inflation is still fairly contained. The 3.3% headline is almost entirely an energy story: gasoline alone accounted for roughly 75% of the monthly CPI increase, with Brent crude spiking from ~$70/barrel before the conflict to $118 by the end of March (currently back down to ~$96 following the ceasefire announcement).
The more interesting debate for the April and May data is the secondary transmission. Diesel feeding into trucking → food costs, jet fuel → airfare (already +14.9% YoY), fertilizer exports through Hormuz → agricultural input costs. Amazon just announced a 3.5% fuel surcharge on third-party sellers starting April 17. These don’t show up in the March CPI at all.
The Fed’s position is genuinely uncomfortable. At their March meeting, they were still penciling in one cut this year, but framed it as needing to stay “nimble.” A sustained supply shock that keeps headline CPI elevated while core stays moderate is the worst-case scenario for them — you can’t really rate-hike your way out of a war-driven oil shock without torching demand unnecessarily.
J.P. Morgan’s framing is worth flagging: if the ceasefire doesn’t hold, their economists called it potentially “the largest oil supply shock in post-World War II history.” The two-week ceasefire is the hinge point — the Strait appears to still be largely blocked even now.