WASHINGTON, D.C. — Annual inflation rose to 3.8% in April 2026, up from 3.5% in March, reaching its highest level in nearly three years as gas prices surged. The increase has made a near-term interest rate cut by the Federal Reserve unlikely, despite earlier signals from some officials favoring looser monetary policy.

Gas prices have climbed approximately $1.40 per gallon from levels before the war began, contributing to the inflation uptick. Fed governor Chris Waller, who had previously supported rate cuts due to concerns about a weak job market, has shifted his stance as labor conditions stabilize and price pressures intensify. "The longer the energy price shock continues, the greater the chance that these increases bleed into other prices," Waller said in an archived recording.

Waller and his Federal Reserve colleagues now appear unified in their reluctance to lower interest rates in the immediate future. The central bank monitors inflation data provided by the Commerce Department, which reported the latest annual figure of 3.8%. Persistent energy-driven inflation has complicated the Fed’s dual mandate of price stability and maximum employment.

President Trump has been urging the Federal Reserve to cut interest rates, though his appeals have not altered the central bank’s current trajectory. Revised economic data also show that U.S. gross domestic product grew at an annual rate of 1.6% in the first quarter of 2026, down from an initial estimate of 2%, suggesting modest economic momentum as prices rise.

Gas prices pushed inflation to its highest level in almost three years, according to verified data. The Commerce Department provides the inflation data that the Federal Reserve watches most closely. Waller’s shift reflects broader concerns among policymakers about the potential for energy costs to affect a wider range of consumer prices.