Inflation Refuses to Budge as Trump’s Iran War Threatens to Make Things Worse

As the Trump administration ramped up its dangerous saber-rattling and proxy conflicts with Iran, Americans were already feeling the pinch of persistently elevated inflation. New Commerce Department data released Thursday reveals that the Personal Consumption Expenditures (PCE) price index — the Federal Reserve’s favored measure — climbed 0.4 percent in February, holding the annual inflation rate at 2.8 percent, well above the Fed’s 2 percent target.

Core inflation, which strips out volatile food and energy costs, also rose 0.4 percent, pushing the annual rate to 3 percent. This indicates that price pressures are broadening and gaining momentum, not easing up. BMO Capital Markets economist Sal Guatieri warned that these increases precede the “spillover pressures from the Iran war,” which is expected to drive costs even higher, especially in energy.

Consumer spending rose a modest 0.5 percent in February, up from 0.3 percent in January, but when adjusted for inflation, real spending barely budged, increasing just 0.1 percent. Meanwhile, Americans are dipping into their savings to maintain consumption, as the personal savings rate dropped from 4.5 to 4 percent. Real after-tax incomes fell 0.5 percent in February, underscoring the squeeze on household budgets.

The timing could not be worse. A separate government report revised US economic growth downward for the last quarter of 2025, showing GDP grew at just 0.5 percent annualized, far weaker than the initial 1.4 percent estimate. This slowdown happened just months before the Trump administration’s military escalation with Iran, which analysts say will exacerbate inflation through higher energy costs and disrupted supply chains.

Economists warn that with inflation likely to climb towards 4 percent amid the conflict, the Federal Reserve has little room to ease monetary policy. The Trump administration’s reckless foreign policy is adding fuel to a domestic economic fire that is already burning Americans’ paychecks.

This inflation story is not just about numbers — it’s about a government prioritizing geopolitical posturing and distraction over the economic wellbeing of everyday people. As prices climb and growth stalls, the Trump administration’s Iran war threatens to deepen the economic pain for millions already struggling to get by.