U.S. Inflation Rises to 4.2% After Iran War, Up From 2.4% in January

U.S. inflation rose to 4.2% last month after energy prices increased during the war in Iran, Washington Examiner reported. The rate had fallen to 2.4% in January and stood near the Federal Reserve’s 2% target at the start of the year.

Core inflation, which excludes food and energy, measured 2.9%. The Federal Reserve’s target interest rate range sits at 3.50% to 3.75%. Economists attribute the recent increase almost entirely to higher oil and gasoline prices after tankers were blocked from the Strait of Hormuz.

They say the surge differs from the 2021-2022 episode that peaked at nearly 9% in June 2022. “The reason we’re not going to get 9% inflation is because monetary policy is under control,” Ryan Young, senior economist at the Competitive Enterprise Institute, told the Washington Examiner. ” Federal Reserve officials project personal consumption expenditures inflation at 3.6% by the end of 2026.

The central bank has stated it remains “unambiguously and unanimously” committed to its 2% target, according to Chairman Kevin Warsh. The labor market added 57,000 jobs last month, and the unemployment rate fell 0.1 percentage point to 4.2% in the July 2 report from the Bureau of Labor Statistics. Markets price in a 76% chance the Fed will raise rates before the November midterm elections.

President Trump said he will defer to Warsh on interest-rate decisions. “There should be a reduction, but I’ll go with the chairman,” Trump said. Mark Hamrick, chief economic analyst for the Hamrick Brief, said the combination of stimulus, low rates, quantitative easing, and supply disruptions that drove the earlier spike is unlikely to recur.

“It’s hard to see how you could replicate this convergence of events,” Hamrick told the Washington Examiner.