Fed's preferred inflation gauge show prices increased even before Iran war began

Core Inflation Data - The inflation gauge monitored by the Federal Reserve rose 2.8% in January year-over-year, slightly below December's increase [1][8] - Core prices, excluding food and energy, increased by 3.1%, up from 3% in the previous month, marking the highest level in nearly two years [2] - Monthly prices rose 0.3% in January, while core prices jumped 0.4% for the second consecutive month, indicating a potential rise in inflation above the Fed's 2% annual target if this pace continues [3] Impact of Geopolitical Events - The ongoing war with Iran, which began on February 28, has disrupted oil supply through the Strait of Hormuz, leading to a more than 40% increase in oil prices and a rise in gas prices to $3.60 per gallon from just under $3 a month prior [4] - Economists forecast that these developments will likely cause inflation to spike in March and potentially April [4] Consumer Spending and Income - Consumer spending increased at a solid pace of 0.4% in January, matching December's rise, indicating that Americans are still contributing to steady economic growth [6] - Incomes also rose by 0.4%, with after-tax incomes jumping 0.9% due to a significant increase in Social Security benefit payments following a cost of living adjustment [9] Federal Reserve's Monetary Policy - The Federal Reserve has maintained elevated key interest rates to slow borrowing, spending, and growth in an effort to further cool inflation [5] - Fed policymakers are expected to keep rates unchanged in their upcoming meeting, as the Middle East conflict is anticipated to raise inflation in the short term [5][11] Price Index Comparisons - The Personal Consumption Expenditures (PCE) index is currently running hotter than the Consumer Price Index (CPI), primarily because it places less weight on rental costs, which have been declining [10]