Inflation expectations rose sharply due to increasing energy prices from Middle East conflict.
Audacy, Inc
U.S. consumer confidence experienced a modest uptick in March, rising to 91.8 from 91.0 in February. This increase occurred despite soaring energy prices, which have been driven by the ongoing conflict in the Middle East, particularly the war in Iran. The Conference Board reported that while overall confidence improved, there is a growing pessimism regarding inflation expectations.
Consumers' 12-month inflation expectations surged to levels not seen since August 2025, reflecting heightened anxiety over rising costs. Gas prices in the U.S. surpassed $4 per gallon for the first time since 2022, significantly impacting consumer sentiment. The national average for regular gasoline reached $4.02, marking an increase of over a dollar since the conflict began.
Economists are concerned that the oil price shock could lead to reduced consumer demand. Despite rising gas prices, some consumers continued to spend, although this trend may change as inflation pressures mount. The short-term outlook for income and business conditions fell, indicating potential recession signals.
The Federal Reserve is unlikely to cut interest rates soon due to persistent inflation concerns. Core inflation, which excludes food and energy, rose to 3.1%, the highest in nearly two years. The labor market remains under strain, with unexpected job cuts reported in February.
The OECD has projected that global inflation could rise to 7.7% due to the conflict, with significant impacts on GDP growth. This situation underscores the delicate balance central banks must maintain between supporting growth and controlling inflation. As energy prices continue to rise, the economic outlook remains uncertain, with potential long-term implications for consumer behavior and spending.
**Sources:** Action Forex, Arab News Japan, Audacy, Inc, CBS News, CPA Practice Advisor, Deloitte Touche Tohmatsu Limited, High Point Enterprise, InvestmentNews, Kaohoon International Financial Daily, Mortgage Professional America, the British Broadcasting Corporation, The Business Times, TradingView, Inc.
U.S. GDP growth is expected to slow from rising borrowing costs and inflation.
The Brookings Institution
U.S. GDP growth is expected to decelerate in the coming years, with projections indicating a decline to 2.0% in 2026 and further to 1.7% in 2027. This slowdown is attributed to rising borrowing costs and persistent inflation, which are anticipated to dampen consumer demand and investment.
Ongoing geopolitical tensions, particularly stemming from the Iran war, are likely to exacerbate inflationary pressures. Analysts predict that U.S. inflation could reach 4.2%, marking the highest rate among G7 nations. The combination of higher borrowing costs and inflation is creating a challenging economic environment.
Furthermore, the Organization for Economic Cooperation and Development (OECD) forecasts a reduction in global economic growth to 2.9% in 2026. This decline is influenced by weaker trade activity and increased energy costs. As central banks may reconsider interest rate hikes in response to rising inflation, the overall economic landscape remains uncertain.
**Sources:** Business Today, frbsf, Statista, Inc., The Brookings Institution.