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US consumer prices likely increased in February ahead of Iran conflict
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US consumer prices likely increased in February ahead of Iran conflict
Mar 10, 2026 9:31 PM

WASHINGTON, March 11 (Reuters) - U.S. consumer prices likely picked up in February as the cost of gasoline increased in anticipation of an escalating war in the Middle East, and with the conflict driving up oil prices, a further rise in inflation is expected in March.

The anticipated increase in the Consumer Price Index last month would also reflect the continued, but staggered pass-through from President Donald Trump's sweeping tariffs, which he pursued under a law meant for use in national emergencies, that have since been struck down by the U.S. Supreme Court.

The Labor Department's consumer inflation report on Wednesday is, however, expected to show underlying price pressures rising moderately last month, thanks to relatively cheaper used motor vehicles and airline fares. It is unlikely to have any impact on near-term monetary policy, with the Federal Reserve expected to keep interest rates unchanged next week.  

"The February CPI is likely to show that progress on lowering inflation is stalling out again," said Sarah House, a senior economist at Wells Fargo. 

"Although the conflict in the Middle East started at the end of February, oil and gasoline prices were already rising last month in anticipation of an escalation," House said.

The CPI likely increased 0.3% last month after climbing 0.2% in January, a Reuters survey of economists predicted. Estimates ranged from a 0.1% rise to a 0.3% increase. In the 12 months through February, the CPI was estimated to have advanced 2.4%, which would match January's increase, and reflect last year's high readings dropping out of the calculation.

The U.S. central bank tracks the Personal Consumption Expenditures price indexes for its 2% inflation target.   

Economists estimated that gasoline prices rose by about 0.8% in the CPI report after declining for two straight months. 

Prices at the pump have jumped by more than 18% to $3.54 per gallon since the U.S.-Israeli war on Iran started at the end of February, data from motorist advocacy group AAA showed. Oil prices shot up well above $100 per barrel, before pulling back on Tuesday after Trump stated the war could end soon.

UPSIDE RISK TO FOOD PRICES FROM WAR

"The recent 15% move alone suggests a 0.15-0.30 percentage point lift to headline inflation depending on how the conflict evolves," said Andy Schneider, a senior U.S. economist at BNP Paribas Securities.

Food prices likely maintained a moderate pace of increase, though Schneider added "a sustained oil price shock would raise fertilizer and transportation costs that could push food inflation higher later in the year."

Excluding the volatile food and energy components, the CPI was forecast to have gained 0.2% after rising 0.3% in January. The so-called core CPI inflation was likely curbed by a decline in used motor vehicle prices, as well as smaller increases in rents and airline fares. 

But prices for goods like apparel and household furnishings likely increased solidly as businesses passed on tariffs. January's Producer Price Index report showed a widening in margins, including for apparel, footwear and accessories retailing. 

Though businesses have absorbed much of the import duties, economists said they were unlikely to continue doing so, citing among others persistently higher readings of input costs in the Institute for Supply Management surveys. 

Trump has responded to the Supreme Court ruling by imposing a 10% global tariff, which he said would rise to 15%.

"The trouble is that there is evidence that input costs continue to escalate, even as the level of tariffs has mostly 

stabilized," said Stephen Stanley, chief U.S. economist at Santander U.S. Capital Markets. "The pass-through dynamic could persist for a while."

In the 12 months through February, the core CPI inflation is forecast to have increased 2.5% after rising by the same margin in January, also reflecting favorable base effects. 

Economists said the tame core CPI readings were unlikely to translate into moderate core PCE inflation gains in February. January's delayed PCE price index data due on Friday is expected to show a solid increase in core inflation.

"Weighting differences and unexpected strength in PPI service prices are likely to produce a significantly larger increase in the broader consumption index," said Lou Crandall, chief economist at Wrightson ICAP. "Similar effects are likely to give the core PCE price index an upward bias in the February data due out on April 9."

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