Inflation Tops 4% as the Iran War Pushes Gas Up 40%

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**SPEAKER_9** (1:28)
The consumer price index just hit 4.2%.
That crosses the 4% threshold for the first time in three years. And the underlying data shows this spike is almost entirely driven by surging energy prices tied directly to the conflict in Iran.

**SPEAKER_2** (1:43)
I mean, gasoline prices are up over 40% annually. Which violently reverses the economic narrative we were just looking at. The whole assumption across the market was that prices were cooling.

**SPEAKER_9** (1:54)
Right, everyone thought we were out of the woods.

**SPEAKER_2** (1:55)
Exactly. We were supposedly heading into a period of lower mortgage rates, stable corporate earnings, just general stabilization. And now that entire narrative is gone.

**SPEAKER_9** (2:04)
It is completely gone. We had all these headlines focused on a steady downward glide in prices.
The bond market, the housing market, corporate earnings forecasts, they all basically baked in that continued cooling. And now we have headline inflation printing at 0.5% for the month, putting the annual rate at that 4.2% mark. The immediate problem this creates is a really mechanical one for the people managing the economy.

**SPEAKER_2** (2:30)
Which brings up a very practical limitation, right? If a central bank cannot drill for oil or negotiate a geopolitical ceasefire, how do they fight an inflation spike that is fundamentally caused by a war?

**SPEAKER_9** (2:43)
They don't.

**SPEAKER_2** (2:44)
Right. They just don't have a tool for that.

**SPEAKER_9** (2:45)
No, they don't. And the standard institutional response when this happens is to separate the data.
So policymakers try to look past the headline number. They take that 4.2% and they isolate what economists call core CPI.

**SPEAKER_1** (2:59)
Ah, right.

**SPEAKER_2** (3:01)
Core CPI.

**SPEAKER_9** (3:02)
Yeah. Core inflation, which strips out food and energy costs entirely. So when you look at that core metric, it rose a softer 0.2% for the latest reporting period.

**SPEAKER_2** (3:12)
Okay.

**SPEAKER_9** (3:12)
Which brings the annual core rate to 2.9%.
The argument from the central bank is, energy is volatile commodity, food is subject to weather events. So the core number gives them a truer reading of underlying domestic economic demand.

**SPEAKER_2** (3:26)
I mean, evaluating the health of the economy by excluding food and gas is like evaluating a diet by excluding sugar and carbohydrates.

**SPEAKER_9** (3:34)
Yeah, that's exactly what it is.

**SPEAKER_2** (3:35)
You are ignoring exactly what people consume the most. I get why economists prefer the core metric, because it filters out the noise of global commodity markets, which they obviously don't control. Sure. But dismissing the most volatile categories makes absolutely no logical sense for a normal person, when those are the exact categories that hit your wallet immediately.

**SPEAKER_9** (3:55)
Right. They're the only things you buy every single week.

**SPEAKER_2** (3:58)
Exactly. You can't tell a commuter that their personal inflation rate is only 2.9% when they are paying 40% more to fill their tank just to get to work.

**SPEAKER_9** (4:09)
You really can't. And the reality of those compounding price increases is severe.