Consumer prices in the United States rose 8.5% in March compared to a year prior, the biggest increase since late 1981, the Labor Department reported Tuesday.

What You Need To Know

  • Consumer prices in the United States rose 8.5% in March compared to a year prior, the biggest increase since late 1981

  • Tuesday's report was the first to encompass the surge in gas prices driven by Russia's invasion of Ukraine, which drove up energy prices worldwide, triggered sanctions from Western nations and disrupted a number of markets, including global food supply

  • While the White House attempted to warn Monday that March's report would be "extraordinarily elevated" due to Russia's invasion, it's not fully to blame for the spike in inflation, which has steadily risen in recent months

  • Inflation, which had been largely under control for four decades, began to accelerate last spring as the U.S. and global economies rebounded with unexpected speed and strength from the brief but devastating coronavirus recession that began in the spring of 2020

The report was the first to encompass the surge in gas prices driven by Russia's invasion of Ukraine, which drove up energy prices worldwide, triggered sanctions from Western nations and disrupted a number of markets, including global food supply. 

According to AAA, the average price of a gallon of regular gasoline nationwide is $4.09, down significantly from the record high of $4.331 reached last month after Russia's invasion of Ukraine. The price is up 43% from a year ago, but prices have fallen steadily in recent weeks.

That said, while the White House attempted to warn Monday that March's report would be "extraordinarily elevated" due to Russia's invasion, it's not fully to blame for the spike in inflation, which has steadily risen in recent months. Rising housing and food costs were also a major driver of inflation.

The food index in particular rose 8.8%, outstripping the overall inflation figure, representing the largest 12-month increase since May of 1981, according to the Labor Department. Housing costs, which make up about a third of the consumer price index, have also escalated.

Economists point out that as the economy has emerged from the depths of the pandemic, consumers have been gradually broadening their spending beyond goods to include more services. A result is that high inflation, which at first had reflected mainly a shortage of goods — from cars and furniture to electronics and sports equipment — has been emerging in services, too, like travel, health care and entertainment.

The expected fast pace of the Fed’s rate increases will make loans sharply more expensive for consumers and businesses. Mortgage rates, in particular, though not directly influenced by the Fed, have rocketed higher in recent weeks, making home buying more expensive. Many economists say they worry that the Fed has waited too long to begin raising rates and might end up acting so aggressively as to trigger a recession.

Inflation, which had been largely under control for four decades, began to accelerate last spring as the U.S. and global economies rebounded with unexpected speed and strength from the brief but devastating coronavirus recession that began in the spring of 2020.

The recovery, fueled by huge infusions of government spending and super-low interest rates, caught businesses by surprise, forcing them to scramble to meet surging customer demand. Factories, ports and freight yards struggled to keep up, leading to chronic shipping delays and price spikes.

Republicans have hammered the Biden administration and Democrats on rising inflation, blaming their policies for the rise in consumer products and portending their strategy to try and retake control of Congress in the 2022 midterm elections.