Key Inflation Gauge Worsened in January Before Iran War Lifted Gas Prices

Prices rose 2.8% in January compared with a year earlier, the Commerce Department said.

Mar. 13, 2026 at 2:10pm

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An inflation gauge closely monitored by the Federal Reserve moved higher in January, with prices rising 2.8% compared to a year earlier. This was slightly below December's increase, but core prices excluding food and energy rose 3.1%, the highest in nearly two years. The data was released before the start of the Iran war, which has since caused oil and gas prices to spike.

Why it matters

The Federal Reserve closely watches this inflation gauge as it determines monetary policy. The rising inflation, even before the impact of the Iran war, suggests the Fed may need to keep interest rates elevated to slow borrowing, spending and growth in order to cool inflation further.

The details

Prices 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 showing Americans are still driving steady economic growth.

  • Prices rose 2.8% in January compared with a year earlier.
  • The data was released on March 13, 2026.

The players

Federal Reserve

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

Commerce Department

A U.S. government agency that collects and publishes economic and demographic data, including the personal consumption expenditures price index.

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What’s next

The Federal Reserve will meet next week and is widely expected to keep interest rates unchanged, despite the conflict in the Middle East that will likely cause inflation to spike in the short term.

The takeaway

This report highlights the persistent inflationary pressures facing the U.S. economy, even before the impact of the Iran war and surging oil prices. The Federal Reserve will need to carefully balance its efforts to cool inflation while avoiding tipping the economy into recession.