The Pulse

Cities Where Inflation Is Rising The Most

Year-over-year inflation rate hits 4.9% in April

To determine the cities where inflation is rising the most – and thus is the biggest problem – WalletHub compared 23 major MSAs (Metropolitan Statistical Areas) across two key metrics involving the Consumer Price Index, which measures inflation. View findings here.

Americans are still dealing with sky-high inflation, which hit a 40-year high last year. Though inflation has started to slow slightly due to factors like the Federal Reserve rate hikes, the year-over-year inflation rate was still a whopping 4.9% in April. This high inflation is driven by a variety of factors, including the continued presence of the COVID-19 pandemic, the war in Ukraine and labor shortages. The government is hoping to continue to rein in inflation with additional interest rate hikes this year, but exactly how much of an effect that will have remains to be seen.

Inflation rates differ across the U.S, though. In order to determine the cities where inflation is rising the most – and thus is the biggest problem – WalletHub compared 23 major MSAs (Metropolitan Statistical Areas) across two key metrics related to the Consumer Price Index, which measures inflation. They compared the Consumer Price Index for the latest month for which BLS data is available to two months prior and one year prior to get a snapshot of how inflation has changed in the short and long term.

Rising the MostRising the Least
1. Miami, FL19. Honolulu, HI
2. Detroit, MI20. Philadelphia, PA
3. Phoenix, AZ21. Riverside, CA
4. Tampa, FL22. Minneapolis, MN
5. Seattle, WA23. New York, NY

Expert Commentary

What are the main factors currently driving inflation?

“The initial cause was the presence of acute supply shortages owing to decades of offshoring production followed by pandemic-wrought supply chain disruptions. These grew especially problematic as more people stayed home during the first 18 months of the pandemic, raising demand for home products and appliances we were no longer producing but instead importing from China and elsewhere. The Russian invasion of Ukraine then worsened this by raising food and fuel prices. At this point the main driver appears to be opportunistic price-gouging by firms acting under cover of the aforementioned causes, hoping we will keep blaming price rises on the war and other supply chain disruptions. The fact that corporate profit margins are the highest on record, combined with CEO shareholder calls in which corporate executives are boasting about how they are using prior price rises as cover for further price hikes, lends further credence to this prospect.”
Robert C. Hockett – Professor, Cornell University

“If we use the standard definition of inflation as the rise of prices of goods and services in the economy, energy, autos, and housing prices have all risen substantially in the last year. The same for travel and insurance. Even restaurant prices have risen considerably. The unexpected severity and persistence of supply-chain delays continues to impact inflation. The war in Ukraine has impacted that as well and demand has not diminished. More jobs were created in the last couple of years than in the previous administration: low unemployment and rising wages have kept demand strong. Strong demand for fewer goods is the basic recipe for higher prices.”
Karen Kunz, DPA – MPA Director; Associate Professor, West Virginia University 

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

“If upcoming data shows inflation is coming down noticeably, there will be less need for the Fed to increase the federal funds rate. As a result, evidence of a significant decline in inflationary pressures would allow for less tightening by the Fed and thus less of an economic slowdown. If inflation is ‘sticky’, the Fed may need to do more, resulting in tighter credit and a more significant economic slowdown. In terms of the economic outlook, other factors play a role including potential banking issues (some banks made risky loans since credit was so cheap and now are at risk). Also, consumers and companies are still adjusting to the new environment in which credit is not as cheap as it was from 2020 to early 2022.”
William Seyfried, Ph.D. – Professor; Associate Dean and Chief Operating Officer of the Crummer Graduate School of Business, Rollins College

“Traditionally, high inflation brings with it fears of recession as borrowing costs drag the economy down. Unemployment increases and demand decreases as consumers are no longer able to afford to spend as much. That’s beginning to peek through now, as spending is starting to slow and layoffs increase, and reports of corporate earnings are often not as robust as analysts expect. However, high inflation does not always lead to recession. In 2006 inflation got as high as 4.7% but was not followed by a recession (the 2008-9 crash was a stock market/housing market greed-related event).”
Karen Kunz, DPA – MPA Director; Associate Professor, West Virginia University

If inflation is ‘sticky’, the Fed may need to do more, resulting in tighter credit and a more significant economic slowdown...

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

“It is exceedingly BAD for the present inflation. Rate hikes operate by causing unemployment, and lowering demand in the macroeconomy. But the present inflation is more saliently supply- than demand-rooted. You can see this in the numbers. Prices are rising more rapidly than wages and salaries while rising more slowly than profits. One need not be Jacob Bernoulli or any other renowned statistician to understand that when one indicator leads and another indicator lags, it is the former indicator that operates as a cause rather than an effect. In this case that’s profits.”
Robert C. Hockett – Professor, Cornell University

“That is really the only thing the Fed can do to combat inflation. Is it working…? Again, low unemployment and strong demand for basic goods, dining out, travel, etc. are a bit of a headwind…There are a few things that could be done… we could consider targeted prices controls, as Europe is doing, or reduce tariffs, which would make household goods cheaper. The Inflation Reduction Act will increase production, which will increase supply of some goods, making them cheaper as well, but that is a longer-term fix. The government could slow down its own spending, or slow down demand, but not moving forward with the student-loan forgiveness program, for one example.”
Karen Kunz, DPA – MPA Director; Associate Professor, West Virginia University