Home / Business and Economy / Fed Eyes Inflation Shock as War Fuels Price Hikes
Fed Eyes Inflation Shock as War Fuels Price Hikes
8 Apr
Summary
- Fed officials acknowledged war's impact on inflation in March.
- Policymakers raised inflation outlook for 2026 by quarter percentage.
- Minutes may detail risks from unpredictable conflict scenarios.
Federal Reserve officials convened in March with knowledge that the ongoing U.S.-Iran war was poised to elevate inflation throughout the year. The minutes from this two-day meeting, released on Wednesday afternoon, shed light on the significant risks central bankers and staff perceive from the conflict.
During the March 17-18 meeting, benchmark oil prices had surged significantly, prompting nearly all policymakers to revise their economic projections upwards, anticipating higher inflation for 2026. Fed Chair Jerome Powell confirmed that various scenarios, including those related to the war's duration and economic impact, were discussed.
Fed officials elevated their outlook for 2026 inflation by roughly a quarter of a percentage point. The Personal Consumption Expenditures price index was projected to end the year at 2.7%, up from a previous 2.4% forecast. Core inflation excluding food and energy also saw an upward revision.
New research from Dallas Fed economists suggests these estimates might be conservative. Their analysis indicates that prolonged disruptions to the Strait of Hormuz could push oil prices even higher, significantly increasing headline U.S. inflation, potentially by as much as 1.47 percentage points.
