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Falling gas prices imply further inflation relief

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Retail gasoline prices in the United States are poised to continue their recent decline as the summer driving season ends and households fall back into more traditional schedules.

The average retail gasoline price has declined to $3.78 per gallon from a peak of $5.01 on June 13—a 21.2% drop—and wholesale futures point to sustained declines ahead.

Gas futures

These declines should put downward pressure on top-line monthly inflation when the consumer price index for August is released on Sept. 13.

Even with falling gas prices, the Fed should not waver from its commitment to restore price stability.

In addition, there is a reasonable probability that top-line inflation will continue to fall in September along with gas prices and quite possibly create a reading on year-over-year inflation at or near 7%, below the current 8.5% rate.

While this decline provides relief to beleaguered commuters and American households, it does not mean that the Federal Reserve will pause in its efforts to restore price stability.

We call on the Federal Reserve to lift its policy rate by 75 basis points at its meeting on Sept. 21 and continue driving the federal funds rate higher until it reaches 4% before it considers a pause in the increases.

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About Joseph Brusuelas

@JoeBrusuelas

Joe Brusuelas, “chief economist to the middle market,” is the preeminent voice championing issues and policies facing midsize companies in the United States and around the world. An award-winning economist, Brusuelas has more than 20 years’ experience analyzing U.S. monetary policy, labor markets, fiscal policy, international finance, economic indicators and the condition of the U.S. consumer.

A member of the Wall Street Journal’s forecasting panel and the UCLA Anderson School of Management's Board of Directors, Brusuelas regularly briefs members of Congress and other senior officials regarding the impacts of federal policy on the middle market and the factors by which middle market executives make business decisions. He also frequently offers his insights on the U.S., Canadian and global economies in the financial media. In 2020, he was named one of the 100 most influential economists by Richtopia. In December 2023, Brusuelas and the economics team were recognized on Bloomberg's list of Best Bond Forecasters after correctly predicting where the benchmark Treasury would end the year.

Before joining RSM in 2014, Brusuelas spent four years as a senior economist at Bloomberg L.P. and the Bloomberg Briefs newsletter group, where he co-founded the award-winning Bloomberg Economic Brief. Earlier in his career, he was a director at Moody's Analytics covering the U.S. and global economies for the Dismal Scientist website. He also served as chief economist at Merk Investments L.L.C. and chief U.S. economist at IDEAglobal.

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