The problem is that even before fuel prices began to spike, inflation had already been accelerating and running hot, and the current fuel price spikes will add to it, just when the economy has become more forgiving of price increases. That’s very bad timing:
The broadest inflation gauge, which tracks inflation across GDP and not just consumer-facing inflation, rose by 3.7% in Q4. The price index in GDP that excludes imports rose by 3.8% in Q4, the worst since 2022. The core PCE Price Index, the Fed-preferred inflation index for consumer price inflation, rose by 3.1% in January, the worst in nearly two years. The core Producer Price Index, which tracks inflation that companies face, jumped by 5.6%, the worst since August 2022 (see charts at the bottom of the article).
The average retail price of gasoline, all grades combined, at gas stations on Monday spiked by another $0.24 from the prior week, and by $1.17 or by 40% since the beginning of the year, to $4.10 per gallon, the highest since August 2022, according to EIA data released this morning, based on a survey of gas stations on Monday.
These price increases of gasoline will enter into the inflation calculations for the Consumer Price Index (CPI) and the Fed-preferred PCE price index for March, to be released in April; and they will push up the broad GDP inflation measures for Q1.
The three-and-a-half-year long decline in gasoline prices from over $5 in mid-2022 to $2.91 in early January was a substantial contributor to the cooling of overall consumer price inflation rates. And that impetus has done a U-turn. Overall inflation measures for March will show that U-turn, and will be hot.
But gasoline price spikes unwind: In early January 2026, gasoline cost the same as during some periods in 2007 and 2008, and a lot less than during part of the time in between.
When gasoline prices fall back to earth, they push down inflation, which is why the Fed could be tempted to “look through” (meaning, ignore) the spike
সূত্র: Wolf Street
ক্যাটাগরি: অর্থনীতি ও ব্যবসা