Key Inflation Gauge Worsened in January Before Iran War

The Federal Reserve's closely watched inflation measure rose higher in January, signaling persistent price pressures even before the Iran conflict caused oil and gas prices to spike.

Mar. 13, 2026 at 4:45pm

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The Commerce Department reported that a key inflation gauge closely monitored by the Federal Reserve rose 2.8% in January compared to a year earlier, slightly below December's increase. However, core prices, which exclude volatile food and energy categories, jumped 3.1% - the highest in nearly two years. The data predates the recent conflict with Iran, which has caused oil and gas prices to soar, likely leading to further inflation spikes in the coming months.

Why it matters

The Federal Reserve has been working to cool inflation through interest rate hikes, but the latest data shows prices were already persistently elevated even before the Iran war disrupted global energy supplies. This puts the central bank in a difficult position as it tries to balance fighting inflation while avoiding further economic slowdown.

The details

Prices rose 0.3% in January on a monthly basis, while core prices jumped 0.4% for the second straight month - a pace that would lift inflation well above the Fed's 2% annual target if sustained. The data was delayed due to the government shutdown last fall, but has now been overtaken by the conflict with Iran, which has cut off one-fifth of the world's oil supply and caused oil prices to soar more than 40% since late February.

  • The inflation data is from January 2026, before the start of the Iran war on February 28, 2026.
  • The government shutdown last fall created a backlog of economic data that is now nearly cleared.

The players

Federal Reserve

The central banking system of the United States that is responsible for monetary policy, including setting interest rates to influence inflation and employment.

Commerce Department

The U.S. federal executive department that oversees economic and demographic data, including the release of key inflation metrics.

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What’s next

The Federal Reserve is widely expected to keep interest rates unchanged at its next policy meeting next week, as the conflict in the Middle East is likely to drive further inflation in the short term.

The takeaway

This data highlights the difficult position the Federal Reserve finds itself in, as it tries to balance fighting persistent inflation through higher interest rates while avoiding further economic slowdown caused by global events like the Iran conflict that are driving up energy prices.