In the last two weeks, US economic data showed mixed signals with rising producer inflation and unexpected jobless claims declines amid the backdrop of escalating tensions in the Iran war. The Federal Reserve held interest rates steady, though one policymaker signaled a potential hike, reflecting uncertainty fueled by geopolitical risks. Let’s dive in!
- Producer Prices Surge: U.S. producer prices rose 0.7% in February, the largest increase in seven months, driven by higher service and goods costs amidst rising oil prices linked to Middle East conflicts and ongoing tariff impacts. Core inflation measures showed sustained gains, influencing Fed rate outlooks.
- Labor Market Update: Initial unemployment claims fell by 8,000 to 205,000 for the week ending March 14, indicating steadier labor conditions. Despite February’s payroll decline of 92,000 jobs, factors like improved weather and resumed healthcare work suggested potential job growth in March.
- Fed Holds Rate: The Federal Reserve held its key interest rate at 3.5%-3.75%, projecting slower future hikes and anticipating rate cuts in 2026 and 2027 amid elevated inflation and geopolitical uncertainty from the Middle East conflict.
- Fed Rate Outlook: One Fed policymaker projected a rate hike for next year, breaking a two-and-a-half-year consensus expecting cuts. Inflation forecasts rose, with year-end Personal Consumption Expenditures (PCE) inflation now seen at 2.7%, while unemployment and GDP growth forecasts remained steady.
- GDP Growth Slowed: Real GDP increased 0.7% annualized in Q4 2025, revised down from 1.4%, reflecting lower exports and slowed consumer and government spending. Full-year 2025 GDP rose 2.1%, driven by consumer spending and investment, despite impacts from a partial federal government shutdown.
- Gasoline Prices Surge: Gasoline prices hit their highest since March 2022, rising above $3.91 per gallon amid Middle East tensions and oil futures climbing. Diesel prices also surged 38% monthly, raising concerns over broader inflation and supply chain impacts.
- Stagflation Fears Addressed: Federal Reserve Chair Jerome Powell stated that despite recent energy price spikes from the Iran conflict, the U.S. economy was not experiencing stagflation like in the 1970s, noting inflation was only slightly above target and unemployment remained low.
- Factory Production: U.S. factory production edged up 0.2% in February despite tariff-related cost pressures and Middle East conflict risks. Manufacturing gains in vehicles and tech offset declines in machinery, while housing sentiment slightly improved despite rising mortgage rates.
- Aluminum Supply Disruption: The U.S.-Israel conflict with Iran caused significant aluminum supply disruptions in the Middle East, pushing prices close to 4-year highs near $3,370 per ton. Reduced production and shipping constraints raised concerns of further shortages, while demand and Chinese production remain key factors.
Over the next two weeks, markets will be monitoring developments in the Middle East alongside key economic data on inflation, the labor market, and consumer sentiment. These factors will play a central role in shaping near-term market direction and expectations for policy.
Footnotes
SFM Market Commentary: 3/27/26
In the last two weeks, US economic data showed mixed signals with rising producer inflation and unexpected jobless claims declines amid the backdrop of escalating tensions in the Iran war. The Federal Reserve held interest rates steady, though one policymaker signaled a potential hike, reflecting uncertainty fueled by geopolitical risks. Let’s dive in!
Over the next two weeks, markets will be monitoring developments in the Middle East alongside key economic data on inflation, the labor market, and consumer sentiment. These factors will play a central role in shaping near-term market direction and expectations for policy.
Footnotes