US President Donald Trump spoke positively about inflation after the consumer price index rose above 4% for the first time in three years. On Wednesday, speaking to reporters at the White House, Trump described the released data as "great."
The increase is attributed to rising energy prices alongside the Iran conflict. This situation has made price pressures on essential items like food and gasoline more visible.
Growing Pressure on Households
According to the New York Federal Reserve's monthly consumer expectations survey, the proportion of people who view their current situation as "much worse" compared to last year has reached nearly a four-year high. Experts note that the energy shock is adding extra strain to already stretched consumer budgets.
Estimates prepared for the opposition side of the Congressional Joint Economic Committee calculate that due to tariffs and the Iran conflict, each household will lose over $3,100 from 2025 through May 2026.
Stephen Kates, a certified financial planner at Bankrate, said most American households are experiencing negative real income growth. Kates explained that much of the wage increases have been wiped out by inflation.
According to data from the US Bureau of Labor Statistics, average hourly earnings increased by 3.4% compared to last year, but inflation is running higher. This gap prevents wages from keeping pace with price increases.
Wayne Winegarden, an economist at the Pacific Research Institute, said that annual inflation at 4.2% is eroding Americans' incomes and assets. Winegarden emphasized that underestimating this effect is problematic.
Gasoline Prices and Savings Also Impacted
Gasoline prices have been one of the most sensitive issues since the start of the conflict. According to AAA data, as of Thursday, consumers paid a national average of $4.13 per gallon; this figure was about $3.12 a year ago.
Data from the US Bureau of Economic Analysis shows that during the period when inflation outpaced wages, the personal savings rate has fallen to its lowest level since 2022.
Rick Rieder, BlackRock’s head of fixed income, said the speed at which the Strait of Hormuz—the main maritime route—reopens will be critical for future cost pressures. The strait is used to transport about one-fifth of the world’s oil.
This week, Trump claimed that an agreement with Iran could be reached within days and that inflation would rapidly decline if the war ends. The president expects oil prices to return to previous levels once the conflict is over.
However, experts warn that even if a peace deal is made, the inflationary effects of the war may take weeks or months to impact consumers. Some Federal Reserve policymakers also caution that prolonged conflict could raise long-term inflation expectations.
