Key Inflation Gauge Worsened in January Before Iran War

Prices rose 2.8% in January compared to a year earlier, with core prices up 3.1%

Mar. 13, 2026 at 6:35pm

Got story updates? Submit your updates here. ›

An inflation gauge closely monitored by the Federal Reserve moved higher in January, with prices rising 2.8% compared to a year earlier and core prices, excluding volatile food and energy categories, jumping 3.1%. This was the latest sign that prices were persistently elevated even before the Iran war caused spikes in oil and gas costs.

Why it matters

The worsening inflation data in January, before the Iran war's impact on energy prices, suggests the Federal Reserve may need to keep interest rates elevated for longer to cool inflation. This could slow economic growth and impact consumer spending, which powers two-thirds of the U.S. economy.

The details

The personal consumption expenditures (PCE) price index, the Fed's preferred inflation gauge, rose 0.3% in January on a monthly basis, while core prices jumped 0.4% for the second straight month. This pace, if sustained, would lift inflation far above the Fed's 2% annual target. Consumer spending also rose 0.4% in January, matching December's pace and indicating Americans are still driving steady economic growth.

  • The inflation data is from January 2026, before the Iran war began on February 28, 2026.
  • The Federal Reserve is expected to meet next week to discuss monetary policy.

The players

Federal Reserve

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

Got photos? Submit your photos here. ›

What’s next

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

The takeaway

The January inflation data, which showed prices rising at a faster pace even before the Iran war's impact, underscores the challenge the Federal Reserve faces in bringing down stubbornly high inflation without tipping the economy into a recession through aggressive interest rate hikes.