A new report from the San Francisco Federal Reserve Bank shows U.S. household inflation expectations rise when expecting higher gas prices, but remain relatively unchanged when prices at the pump drop.
Data from the nation’s second-largest Federal Reserve bank branch also found that uncertainty around price growth in general swells when households pay more for gas.
“Our results suggest that gasoline price pressures may leave a more persistent imprint on household inflation outlooks when prices climb than when they subside,” according to the authors of the report.
The survey tracked respondents’ monthly answers from June 2013 to June 2025, asking them to input their expected change in gas prices over the next year and as well as their expectations for inflation. It found that a 10% change in expected gas price growth was associated with a 0.24% increase in one-year inflation expectations, meaning that consumers who come to expect higher gas price growth also tended to anticipate higher inflation.
The report caveats that expectations between gas prices and inflation may move jointly for other reasons, like fresh economic news or shifts in the mix of survey respondents.
Still, the authors of the report call the relationship “modest, but statistically significant.”
“Increases in expected gas price growth comove more strongly with broader inflation expectations than decreases in expected gas price growth. This asymmetry suggests that inflation expectations may rise as households expect gas prices to climb, but inflation expectations may not retrace those increases when households later expect the run-up in gas prices to unwind.”
The report by the San Francisco Fed comes as Americans are experiencing higher fuel costs due in part to global energy supply chain disruptions stemming from the war with Iran.
According to AAA, the nationwide average for a gallon of regular gas sat at $4.08—roughly 90 cents higher compared to a year ago.
That cost jumps to $5.60 per gallon for diesel.
Overall inflation has accelerated in the last year. In June of 2025, the Bureau of Labor Statistics reported annual year-over-year inflation of 2.7%. As of June 2026, that number has spiked to 3.4%.
All of this comes as inflation remains a key issue ahead of November’s midterm elections.
A recent Reuters/Ipsos poll found that 36% of respondents prefer Democrats’ plans to address the cost of living versus just 26% for Republicans. The 8% difference is the highest separation since Reuters/Ipsos began tracking that metric in October 2025.
