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The Consumer Price Index for February will be reported at 8:30 a.m. ET Wednesday and is expected to show that prices rose only slightly right before the Iran war sent energy costs skyrocketing.<\/p>\n
Analysts and economists surveyed expect inflation overall to have risen 0.3% from January. Year over year, inflation is expected to remain tracking at 2.4%. Core inflation, which excludes the often-volatile categories of food and energy, is expected to have declined to a 0.2% month-over-month pace, down from 0.3% in January.<\/p>\n
\u201cThe February CPI report should continue to show that inflation remains relatively contained,\u201d Bank of America economists wrote in a recent note.<\/p>\n
Crucially, February\u2019s report was produced before the U.S. and Israel launched a large-scale attack on Iran on the final day of the month. <\/p>\n
The critical Strait of Hormuz, off the southwestern corner of Iran, has been effectively shut down since the war began. <\/p>\n
More than 20% of the world\u2019s supply of oil typically transits the waterway to reach the international markets. As a result, the price of U.S. crude oil has increased more than 20% since the first strikes. Retail gas prices have also soared more than 50 cents.<\/p>\n
Also in February, the Supreme Court struck down many of President Donald Trump\u2019s tariffs, ruling that he exceeded his presidential authority when he imposed country-specific emergency tariffs last year. While Trump has replaced some of the tariffs with a global 10% duty, the impact on prices is not yet clear.<\/p>\n
\u201cPerhaps more important than the Feb. data is the evolving risk space for inflation,\u201d Bank of America wrote. \u201cWhile our base case is for the conflict to be short-lived, a longer conflict would likely lead to a more sustained increase in oil.\u201d<\/p>\n
\u201cThat would put upward pressure on headline, core inflation and inflation expectations in the months ahead,\u201d BofA\u2019s analysts added. <\/p>\n
JPMorgan Chase\u2019s chief U.S. economist, Michael Feroli, wrote in a note this week: \u201cThe economy should not have much trouble weathering a moderate oil price spike, but there is an increasing risk that higher prices could create a more material near-term drag on the economy\u2014particularly if they were to rise well above $100 per barrel and hold there.\u201d <\/p>\n
Still, he said, \u201cthe risk remains for a much larger and more sustained increase in oil prices should disruptions to supply persist.\u201d<\/p>\n
On Tuesday, Iran continued to exchange fire with regional neighbors. <\/p>\n
Morgan Stanley economist Diego Anzoategu wrote in a recent note that the impact on core inflation from higher oil prices \u201cis not only small but also highly narrow: historically, the pass-through occurs mainly through airfares. Absent a sharper rise in energy prices, the effects on core inflation tend to be short-lived and limited.\u201d<\/p>\n
U.S. oil prices rose above $100 per barrel Sunday and Monday morning, but since then trading has moderated, and the benchmark traded around $85 per barrel late Tuesday.<\/p>\n
Airlines used to hedge against spiking prices, but they no longer do so.<\/p>\n