US gas prices have fallen sharply since June.
JOSEPH PREZIOSO/Getty Images
US gas prices are on the rise again, stoking concerns that it could fuel inflation.
The average gallon of gas traded at $3.89, its highest level since October 2022.
Economist Mohamed El-Erian said this was why people were worried about an “inflation smile.”
US gas prices are on the rise again, threatening to worsen an inflation problem the Federal Reserve has worked hard to fight over the past year.
The average gallon of gas traded at $3.89, its highest level since October 2022, per AAA.
The surge in gas prices comes amid rising oil prices, largely spurred by supply cuts by key producers including Saudi Arabia and Russia. Both benchmark Brent crude and West Texas Intermediate are currently trading upwards of $80 a barrel.
Top economist and Allianz adviser Mohamed El-Erian said, in a post on on X, that people were worrying about an inflation “smile” in the US, “that is, the current fall in headline inflation giving way to a stabilization and then a move back up in the fourth quarter of the year.”
“Other factors fueling this worry include the still-high core inflation rate and, related to that, the possibility that the process of goods dis-inflation may end before service sector inflation is well under control,” he added.
Mark Zandi, chief economist of Moody’s Analytics, said the spike in oil prices were a threat to his optimism about US inflation.
Inflation has fallen from the 40-year highs it hit in mid-2022, rising at 3% through June. That followed the Fed’s aggressive interest-rate hikes since early last year.
The US central bank has raised benchmark borrowing costs by 500 basis points in its fastest rate-hiking cycle in history, with traders expecting more rises this year as it seeks to cool consumer price pressures to its 2% target.