The Pulse

Changes In Inflation By City

The year-over-year inflation rate hit 3.1% in January, which is above the target rate of 2%

To determine how inflation is impacting people in different cities, WalletHub compared 23 major MSAs (Metropolitan Statistical Areas) across two key metrics involving the Consumer Price Index, which measures inflation. View the complete report findings and infographics here.

The U.S. inflation rate hit a 40-year high after the pandemic but has since cooled significantly due to factors like the Federal Reserve rate hikes. The year-over-year inflation rate sits at 3.1% in January 2024, which is still above the target rate of 2%. Various factors, such as the war in Ukraine and labor shortages, drive this higher than average inflation. Despite the country not meeting its target yet, the Federal Reserve is actually expected to cut interest rates this year rather than raising them further.

Inflation rates differ across the U.S., though. To determine how inflation is impacting people in different parts of the country, WalletHub compared 23 major MSAs (Metropolitan Statistical Areas) across two key metrics related to the Consumer Price Index, which measures inflation. We compared the Consumer Price Index for the latest month for which BLS data is available two months prior and one year prior to get a snapshot of how inflation has changed in the short and long term.

Biggest Inflation ProblemSmallest Inflation Problem
1. Dallas, TX19. St. Louis, MO
2. Miami, FL20. San Francisco, CA
3. New York, NY21. Baltimore, MD
T-4. Tampa, FL22. Phoenix, AZ
T-4. Honolulu, HI23. Anchorage, AK

Expert Commentary

What can be done to continue to slow down inflation?

“The Federal Reserve should continue its course of tightening. It is appropriate to keep interest rates above inflation and to ‘quantitatively tighten,’ meaning to allow assets on its balance sheet to mature without purchasing new ones. However, the Fed must be careful. Now that inflation has fallen so much, it may be time to ease slightly. We still want an overall disinflationary policy. But we do not want them to keep policy too tight for too long, because that may cause unnecessary economic stress. We want to keep the economy at its potential in terms of output and employment.”
Alexander William Salter – Associate Professor, Texas Tech University; Comparative Economics Research Fellow, Free Market Institute

“A balanced budget would be a great step forward. We desperately need to reduce the national debt which now stands at 34 trillion dollars, implying that the cost of servicing it (aka interest payments due on bonds outstanding) is now greater than the defense budget and keeps increasing, forcing the Fed to print more money. At the same time, regulations and restrictions on the use of energy should be eliminated to boost economic growth. These two things would solve the inflation problem.”
Abir Mandal – Assistant Professor, University of Mount Olive

Is raising interest rates a good or bad solution to control inflation?

“While there is uncertainty about how effective interest rates are, there is consensus among economists that raising interest rates does lower inflation somewhat. However, interest rates are a blunt tool and rising interest rates can have widely varying impacts on households and businesses depending on their financial situation. For example, someone who wants to buy a house in early 2024 with a 7% mortgage rate is severely disadvantaged relative to someone who bought a house in 2021 with a 3% mortgage rate.”
Aeimit Lakdawala – Assistant Professor, Wake Forest University

Inflation is nearly back to pre-pandemic levels. That is why the Fed has applied the brakes to its policy of pushing interest rates upward...

“Raising interest rates can be effective, and it is an easy tool for the Fed to use. However, interest rates are a barometer of monetary policy, not the weather itself. Ideally, the Fed adjusts interest rates to maintain proper liquidity conditions in the banking system. Those conditions (for example, how fast the money supply is growing) ultimately determine inflation.”
Alexander William Salter – Associate Professor, Texas Tech University; Comparative Economics Research Fellow, Free Market Institute

What does the current inflation rate tell us about the future of the economy?

“Inflation is nearly back to pre-pandemic levels. That is why the Fed has applied the brakes to its policy of pushing interest rates upward. The kinks in the global supply chain appear to be ending as well. I think the outlook for a soft landing is good.”
Dan Marburger – Clinical Professor, Arizona State University

“The fall in inflation over the past year is suggesting that supply related issues caused by the pandemic have been gradually fading. While in late 2022 and in early 2023 there was a lot of concern about the economy slowing down in 2023 and 2024, the economy has remained remarkably resilient. Thus the future of the economy looks bright with a strong labor market and low recent inflation.”
Aeimit Lakdawala – Assistant Professor, Wake Forest University