U.S. headline and core inflation are heading back above 3% once more, and inflation expectations for the year ahead are building a head of steam. The only crumb of comfort for the Federal Reserve is that long-dated price rise expectations are better behaved - but even these have been irked by the Iran-war-related oil shock.
A relatively short energy market hiatus can be taken on the chin by most central banks for a while, but their big worry is that a protracted crude outage feeds the expectations of wage bargainers and price setters over time and embeds above-target inflation for longer.
A borrowing rate squeeze to slow credit growth may ultimately be necessary to shake those expectations out of the system. At the very least, the prospect of further interest rate easing looks fanciful in this environment.
Thursday sees the first release since the Iran war of the inflation gauge most closely watched by the Federal Reserve.
The annual rate of inflation captured by the personal consumption expenditures (PCE) gauge is expected to surge back above 3% for the first time in more than two years. The Cleveland Fed's inflation "nowcaster" estimate is pencilling in a rate of 3.4% for March - 1.4 percentage points above the Fed's 2% target.
What's more, it sees that pick up further this month to 3.6% - the highest in almost three years.
There is no relief when stripping out energy and food costs either. The "core" PCE rate is also expected to have topped 3% in March at a two-year high of 3.1%, with the Cleveland Fed pencilling in 3.2% this month.
Whatever happens to spot oil prices in the weeks and months ahead, Brent crude futures at around $80 a barrel for delivery in 12 months' time are still 20% higher than they were before the Iran war.
Inflation expectations over the one-year time horizon are building both in markets and among households.
The U.S. one-year inflation swap is tracking those estimates for March-April and at 3.4%-3.6% is closing in on its highest since the Ukraine shock in 2022. One-year, one-year forward swaps are starting to bolt higher too and, at more than 2.7% this week, are now at their highest in more than a year.
Household surveys are often higher than market expectations, but they are bounding higher again too - with the University of Michigan's one-year reading closing in on 5%.
Long-term expectations are better behaved, reflecting hopes for calmer waters in time. But these too now appear to reflect another shock compounding on top of inflation that had not yet returned to target after the last one.
The 5-year, 5-year forward inflation swap remains relatively subdued, though still significantly above target at 2.4%.
But household surveys show 5-year outlooks as high as 3.5%.
Whether the trimmed-mean PCE - a measure that incoming Fed Chair Kevin Warsh is known to favour - cuts through this noise remains to be seen. But on the face of it, U.S. inflation remains a problem, and the Fed can't take its eye off it.
Given the latest polls on the cost of living, neither can the administration.
(The opinions expressed here are those of Mike Dolan, a columnist for Reuters.)
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