Inflation surges 8.5% in March to highest level since 1981

Costly inflation climbed even higher to a new four-decade high of 8.5% in March as the Russia-Ukraine war contributed to a record surge in gas prices and exacerbated existing supply chain disruptions — forcing Americans to pay even more for basic goods.

The latest uptick in March marked the highest annual rate of increase of inflation since December 1981, according to data from Bureau of Labor Statistics released Tuesday.

On a monthly basis, the Consumer Price Index — a closely tracked inflation gauge that details the costs of goods and services — rose 1.2% from February to March. 

Labor Department officials said price increases for gasoline, shelter and food were the largest contributors to inflation. The gasoline price index rose 18.3% in March.

Excluding volatile food and gas prices, the CPI still rose 6.5% year-over-year.

The March report was the first to fully reflect the impact of Russia’s invasion of Ukraine, which prompted a wave of crippling economic sanctions — including a US ban on Russian energy imports.

The European Union is under pressure to enact a similar step due to its heavy reliance on Russian gas, with ongoing shipments serving as a key source of revenue for the Kremlin.

The March reading came in slightly higher than expected. Economists had expected the consumer price index to jump 8.4% compared to the same month one year earlier.

National average gas prices hit an all-time high of $4.33 on March 11, though they have since declined, according to AAA data.

As of Tuesday, the national average price hovered near approximately $4.10 per gallon. But prices are still much higher than they were on the same day one year earlier, when a gallon of gas cost about $2.86.

The alarming inflation data surfaced as the Federal Reserve ramps up its efforts to return to normal market conditions following extraordinary measures taken in response to the COVID-19 pandemic.

The Fed enacted its first interest rate hike in three years last month and is expected to raise its benchmark rate several more times throughout the year — with some experts suggesting the next increase could be larger than the quarter-percentage-point hike enacted in March.

Surging inflation has effectively erased strong wage increases for workers in what has been a historically tight labor market, with unemployment currently hovering below 4%.

“Inflation has continued to accelerate in recent months and with the higher gasoline and food prices stemming from the war in Ukraine, the worst is likely still to come.” Bankrate chief financial analyst Greg McBride said.

White House Press Secretary Jen Psaki acknowledged the CPI report was likely to show high inflation – while laying the blame on Russian President Vladimir Putin.

“We expect March CPI headline inflation to be extraordinarily elevated due to [Russian President Vladimir] Putin’s price hike, and we expect a large difference between core and headline inflation reflecting the global disruptions in energy and food markets,” Psaki said.

Republican lawmakers have pushed back on the White House’s effort to pin record gas prices on Russia’s invasion, arguing President Biden’s energy problems are most responsible for the situation.