The latest Personal Consumption Expenditures data shows a 3.8% year‑over‑year rise, the fastest pace since May 2023. Prices climbed 0.4% in April, pushing the Fed’s preferred gauge to a three‑year high.

Core inflation, stripped of volatile food and energy, climbed 3.3% YoY after a modest 0.2% jump earlier in the month. The surge follows the Iran conflict, which has rattled global energy markets and raised the urgency of a diplomatic settlement.

Fed officials now face a sharper case to tighten policy. The data signals that supply shocks from the war may not be temporary, challenging the central bank’s traditional stance of "looking through" such events. The economy’s labor market has steadied, but price pressures remain a priority for the Fed’s next rate decision.