Rising Gas Prices Leave Lasting Mark on Inflation Expectations

The San Francisco Federal Reserve Bank has released a new report that finds rising gas prices have a lasting impact on inflation expectations in the US. The study tracked respondents' monthly answers from June 2013 to June 2025 and found that a 10% change in expected gas price growth was associated with a 0.24% increase in one-year inflation expectations.

The report suggests that households tend to anticipate higher inflation when they expect gas prices to rise, but do not retrace those increases when the run-up in gas prices unwinds. This asymmetry indicates that gasoline price pressures may leave a more persistent imprint on household inflation outlooks than previously thought.

The study's findings come as Americans are experiencing higher fuel costs due to global energy supply chain disruptions stemming from the war with Iran. The nationwide average for a gallon of regular gas sat at $4.08, roughly 90 cents higher compared to a year ago. Overall inflation has accelerated in the last year, with annual year-over-year inflation spiking from 2.7% in June 2025 to 3.4% in June 2026.