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- US gas prices just surged to their highest level since October 2022, fanning fears of a rebound in inflation.
- The national average for a gallon of gas traded at $3.86 after jumping towards $4 earlier on Monday.
- "US inflation rate will likely increase again in August," according to a market expert.
US gas prices hit a 10-month high Monday, rising toward $4 a gallon, threatening to put upward pressure on inflation.
The national average for a gallon of gas traded at $3.86 after jumping to $3.96 earlier on Monday, according to AAA.
The surge in fuel costs comes as global oil prices climb, largely spurred by supply cuts by key producers including Saudi Arabia and Russia. Both benchmark Brent crude and the West Texas Intermediate are currently trading north of $80 a barrel.
Rising fuel prices are likely to put upward pressure on US inflation through August, according to market expert Charlie Bilello.
"Gas Prices in the US rise to their highest levels of the year @ $3.96/gallon. What was a big tailwind for CPI in May/June (negative YoY commodity prices) was less of a tailwind in July and much less thus far in August. US inflation rate will likely increase again in August," the chief market strategist at Creative Planning said in a post on X.
Inflation ticked up in July after a year of declines, rising to an annual pace of 3.2% from 3% in June. That's despite the Federal Reserve's aggressive interest rate hiking campaign since early 2022. The central bank has elevated benchmark borrowing costs from near-zero levels to upward of 5% in a bid to cool inflation.
While the policy efforts have significantly tamed price pressures, the central bank has hinted more rate hikes could be on the horizon in a bid to bring down inflation to its 2% target.
Top economist Mohamed El-Erian recently weighed in on the threat of rising gas prices, saying it's fueled worry 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."