Federal Reserve's March Inflation Forecast Worsens

Soaring energy prices and supply chain disruptions may threaten Wall Street's bull market

Mar. 30, 2026 at 9:06am

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The Federal Reserve Bank of Cleveland's Inflation Nowcasting tool predicts that the trailing 12-month inflation rate will jump from 2.4% in February to 3.16% in March, up 14 basis points from the previous projection. This rapid rise in inflation could undermine the current bull market, as the stock market entered 2026 at its second-priciest valuation in history. The prospect of interest rate hikes rather than cuts by the Federal Open Market Committee could lead to a valuation reset for equities.

Why it matters

Persistently high inflation poses a significant risk to the ongoing bull market, as it could force the Federal Reserve to raise interest rates rather than cut them as previously expected. This could lead to a repricing of stocks, which have been trading at historically high valuations. The impact of the Iran war on energy prices and supply chains is a major factor driving this unexpected surge in inflation.

The details

The nationwide price of a gallon of regular gas has jumped 34% to $3.98 over the last month, while diesel prices have increased by 43%. Soaring crude oil prices are directly impacting transportation costs for businesses, which often means consumers will pay more for goods and services beyond the gas pump. The Federal Reserve Bank of Cleveland's Inflation Nowcasting tool predicts that the trailing 12-month inflation rate will jump from 2.4% in February to 3.16% in March, up 14 basis points from the previous projection.

  • On February 28, U.S. and Israeli forces commenced military actions against Iran.
  • Around the same time, Iran announced a virtual closure of oil exports through the Strait of Hormuz.
  • On March 11, the U.S. Bureau of Labor Statistics reported the February inflation data, showing a 2.4% increase in prices over the trailing year.
  • On April 10, the BLS will unveil the March inflation report, which is expected to show a significant increase.

The players

Federal Reserve Bank of Cleveland

The regional Federal Reserve bank responsible for the Inflation Nowcasting tool, which predicts a jump in the trailing 12-month inflation rate from 2.4% in February to 3.16% in March.

Federal Open Market Committee (FOMC)

The 12-person body, including Fed Chair Jerome Powell, responsible for setting the nation's monetary policy.

U.S. Bureau of Labor Statistics (BLS)

The government agency that reports on inflation data, including the February and March inflation reports.

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What’s next

The Federal Open Market Committee will meet on June 17 to decide on potential interest rate changes in response to the worsening inflation outlook.

The takeaway

The unexpected surge in inflation driven by the Iran war's impact on energy prices and supply chains poses a significant threat to the ongoing bull market, as it could force the Federal Reserve to raise interest rates rather than cut them as previously expected. This could lead to a repricing of stocks, which have been trading at historically high valuations.