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War-Driven Energy Spike Pushes US Inflation Near 4%, Delays Rate Cut Outlook

The Federal Reserve's preferred inflation measure is climbing toward 4% as geopolitical tensions in Iran drive energy prices higher, raising concerns that price pressures will extend beyond the fuel sector. Economists have revised their inflation forecasts upward and pushed back expectations for the next interest-rate cut. Philadelphia Federal Reserve President Anna Paulson signaled the central bank will maintain steady rates until inflation shows sustained progress. April data showed the consumer price index rising 3.8% year-over-year, the fastest pace since 2023, driven by surging gasoline and grocery costs. Core inflation, excluding food and energy, increased 0.4% monthly and 2.8% annually. The pressure extends globally. The UK's energy price cap is expected to jump 13% this summer, marking its biggest increase since 2023.