The Pulse

Changes In Inflation By City

Year-over-year inflation rate reaches 3.4% in April

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. View 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 3.4% as of April 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, it’s possible the Federal Reserve could even cut interest rates this year rather than raising them further.

With the year-over-year inflation rate at 3.4% in April, the personal-finance website WalletHub today released its updated report on the Changes in Inflation by City, as well as expert commentary.

Biggest Inflation ProblemSmallest Inflation Problem
1. Honolulu, HI
2. Detroit, MI
19. Baltimore, MD
20. Houston, TX
3. Dallas, TX21. Denver, CO
4. Riverside, CA22. Atlanta, GA
5. Seattle, WA23. Minneapolis, MN

Expert Commentary

What are the main factors currently driving inflation?

“Inflation in 2021 and 2022 was largely about the prices of goods, while today what remains of inflation is largely about the prices of services. The most recent CPI numbers measure inflation at 3.5% per year. In terms of what is pulling that number up, it is mostly services (auto repairs, car insurance, hospital services, and housing). Things look very different from 2021-2022 when food and energy prices were driving inflation numbers (and overall inflation was much higher). Some of the categories people were previously worried about: food in supermarkets, gasoline, etc. are all basically at or around the target of 2% inflation. Other categories that were hit hard by supply shocks as the economy reopened (major appliances, consumer electronics, eggs) are largely less expensive than they were a year ago, as the supply (and demand) shocks have subsided. One tricky thing about housing is that while the CPI measures the current market price of housing, most people aren’t exposed to that price. Around 2/3 of Americans own their own homes, and for those who were lucky/smart enough to refinance at record-low interest rates in 2021, housing remains pretty cheap. For new first-time homebuyers without a house to sell, and for renters, rising prices for shelter/housing remain a huge expense. Housing prices are very different from supermarket items because most households actually benefit from rising prices, while a smaller number can really suffer.”
Christopher Conlon – Associate Professor, New York University

“I would say there are three things currently driving inflation: We are still feeling the effects of consequences of the COVID-19 pandemic with respect to supply chain disruptions and monetary policies, energy and food markets are still in flux due to the role of the war in Ukraine, and more recently, expectations of interest rate reductions. The Fed has used its most potent tool for the last year and a half and increased interest rates significantly. The recent hold on interest rate hikes has generated speculation that interest rates will be cut soon, and as such, consumer spending is on the rise again, especially in the housing market. This coupled with the fact that lenders are currently offering a variety of programs that incentivize increases in mortgage applications (predicated on the fact that rates will soon drop), we continue to see demand and therefore inflation rise.”
Uchechukwu Jarrett – Seacrest Teaching Fellow; Associate Professor of Practice, University of Nebraska–Lincoln

Inflation in 2021 and 2022 was largely about the prices of goods, while today what remains of inflation is largely about the prices of services...

What can be done to continue to slow down inflation?

“Inflation is coming down but not as fast as one would want. Increasing the interest rates and reducing government spending would both contribute to lower expectations of future inflation and, hence, lower the current inflation rate.”
Kjetil Storesletten – Professor, University of Minnesota

“To slow inflation, there are two general ideas. Either increase supply, or reduce demand, The interest rate route the FED has adopted, deals with the demand component, but…not for all goods. The second is an increase in supply which can be accomplished in several ways including trade promotion and production subsidization which has happened to some degree.”
Uchechukwu Jarrett – Seacrest Teaching Fellow; Associate Professor of Practice, University of Nebraska–Lincoln

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

“I think many were expecting (or at least hoping) that with inflation under control, the Federal Reserve would start to reduce interest rates. This tends to stimulate borrowing and business investment and also raises the prices of long-lived assets (stocks, real estate, etc.). With inflation at 3.5%, and an already strong job market, it looks like those plans are on hold. This might be disappointing for some investors, but we shouldn’t get too upset. The Federal Reserve feels we don’t need a rate cut right now, partly because the economy has remained strong. That’s a good thing!”
Christopher Conlon – Associate Professor, New York University

“High inflation hurts today and the future. I have never heard of, or read, anyone putting a positive spin on the future due to the current high inflation. You will hear politicians spinning the current inflation problem as it is a sign of a strong economy. This is true of the current situation. However, the economy is overheated because of deficit spending. The cost of inflation caused by deficit spending will be far beyond the dollars we have to pay back and the interest from the extreme borrowing.”
Scott Kolman – Lecturer, San Diego State University