The Iran war’s oil price shock drove the Federal Reserve’s preferred inflation gauge to 3.8% last month, its highest rate in nearly three years, new data showed Thursday.

The Personal Consumption Expenditures price index rose 0.4% in April from the month before, a deceleration from the 0.7% increase recorded in March. At 3.8%, the annual rate of inflation is the highest since May 2023.

The latest monthly report from the Commerce Department also showed that consumers took their foot off the pedal: Spending rose 0.5% in April, a retreat from a 1% jump the month before.

Gas prices continued to rise in April; however, it was expected that Americans’ wallets – many fatter from bigger tax refunds – eventually wouldn’t be able to keep up with rising costs.

When taking inflation into account, consumer spending rose just 0.1%.

Economists were expecting that inflation would rise 0.5% on a monthly basis and 3.9% from the year before and that spending would slow to 0.3%, according to FactSet.

This story is developing and will be updated.