Rising Gas Prices Drive Persistent Inflation Expectations

The Federal Reserve Bank of San Francisco reported that rising gasoline prices have a more persistent impact on U.S. household inflation expectations than falling prices. Researchers analyzing data from June 2013 to June 2025 found that a 10% increase in expected gas price growth correlates with a 0.24% rise in one-year inflation expectations, whereas price decreases do not cause a corresponding drop in outlooks.

This asymmetry suggests that gasoline price pressures leave a lasting imprint on consumer sentiment. The findings emerge as nationwide average prices for regular gas reach $4.08 per gallon, with annual inflation rising from 2.7% in June 2025 to 3.4% in June 2026. These costs are driven by global energy supply chain disruptions related to the war with Iran.

Economic pressures from fuel costs remain a central issue as the United States approaches the November midterm elections.