Summary
- The US March Consumer Price Index (CPI) rose 3.3%%, the biggest increase in about two years, with a sharp jump in fuel prices after the war cited as the main cause.
- The IMF and OECD raised their US inflation forecasts to 3.2%% and 4.2%%, respectively, saying the burden of higher price levels will persist through year-end even if the war ends.
- With the broader effects of higher energy prices not yet fully reflected, inflation pressures are set to continue, while the April consumer sentiment index fell to a record low of 47.6.
Forecast Trend Report by Period
The surge in US prices triggered by the Israel-Iran war is set to keep weighing on consumers even after the fighting ends, the Financial Times reported.
The FT said on April 19 that the US consumer price index rose 3.3% in March, the biggest increase in about two years since May 2024. A sharp jump in fuel prices after the outbreak of war was cited as the main driver.
According to the American Automobile Association, gasoline prices climbed to $4.08 a gallon from $2.98 when the conflict began. Diesel prices also surged to $5.59 from $3.76 over the same period, nearing the 2022 peak of $5.82 reached after Russia invaded Ukraine.
Economists say the impact of higher energy prices has yet to fully spread across the broader economy. Federal Reserve Governor Christopher Waller said on April 17 that the longer the war lasts and the longer energy prices remain elevated, the greater the chance the increases will spill over into other prices. Companies will factor higher energy input costs into the prices they set.
That means rising prices may remain a political and economic issue through the November midterm elections. Joseph Gagnon, a senior fellow at the Peterson Institute for International Economics, said prices would be noticeably higher by year-end than they would have been without the conflict. Even if inflation gradually eases, the price level will still be far above where it stood in January.
International organizations have also raised their forecasts. The International Monetary Fund lifted its forecast for US inflation this year to 3.2% from 2.5% after the war began. The Organization for Economic Cooperation and Development raised its projection to 4.2% from 2.8% over the same period.
IMF Managing Director Kristalina Georgieva said even if the war were to end tomorrow, its effects would not disappear overnight.
Consumer sentiment has also deteriorated sharply. The University of Michigan's preliminary consumer sentiment index for April fell to 47.6, the lowest level on record.
Shin Yong-hyun, Hankyung.com reporter yonghyun@hankyung.com
Korea Economic Daily
hankyung@bloomingbit.ioThe Korea Economic Daily Global is a digital media where latest news on Korean companies, industries, and financial markets.
