With the year-over-year inflation rate at 2.8% in February, the personal-finance website WalletHub today released its updated report on the Changes in Inflation by City, as well as expert commentary.
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. We 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.
| Biggest Inflation Problem | Smallest Inflation Problem |
| 1. San Diego, CA | 19. Phoenix, AZ |
| 2. Boston, MA | 20. Atlanta, GA |
| 3. Riverside, CA | T-21. St. Louis, MO |
| T-4. New York, NY | T-21. Houston, TX |
| T-4. Chicago, IL | 23. Denver, CO |
https://wallethub.com/edu/
Expert Commentary
What are the main factors currently driving inflation?
“Conceptually, inflation is some combination of excess demand and/or insufficient supply. That said, there are multiple current factors driving inflation. These factors include monetary policy/interest rates, fiscal policy/governmental spending/taxation, governmental policy/trade wars/tariffs, and environmental factors/global warming.”
Michael Weinberg, CFA – Adjunct Professor, Columbia Business School
“The current inflation factors in the United States are shaped by a combination of consumer ‘demand pull’ and production/supply side ‘cost push’ factors. Research on historical shocks shows these factors connect and affect global, foreign, and domestic economies. Strong consumer spending on goods and services has significantly contributed to inflationary pressures as consumer demand outpaces supply. Persistent global supply chain disruptions have resulted in shortages and rising costs for many goods, compounding inflation. Energy price volatility, often driven by geopolitical tensions, has also been critical in elevating overall inflation rates. Labor market tightness, particularly in specific sectors, has led to wage increases, contributing to service inflation. Additionally, accommodative monetary policies during the pandemic and unprecedented fiscal stimulus measures boosted aggregate demand, creating additional upward pressure on prices. Global commodity price fluctuations have added another layer of cost-push inflation, particularly in sectors dependent on raw materials.”
Reginald Gray – Professor, Dallas College Mountain View Campus; Ph.D. Student, University of Texas at Arlington
What can be done to continue to slow down inflation?
“At a high level, the Federal Reserve could increase interest rates to decrease demand for goods and services. This is unlikely, as the Federal Reserve had been cutting rates and only put those cuts on hold, and continues to talk about further rate cuts, rather than increasing them. The government could enact fiscal policy that is more contractionary, i.e., tax increases (unlikely with the current administration), or lower governmental spending (this may already be happening). Not enacting tariffs or entering trade wars would likely be disinflationary and result in a slowing of inflation, which is what is needed.”
Michael Weinberg, CFA – Adjunct Professor, Columbia Business School
“In the short-to-medium term, interest rate policy is still by far the best tool for taming inflation. The Fed has revised its projected interest rate path, suggesting interest rates will not fall much in 2025. This seems appropriate given the recent data, even though I disagree somewhat about the likely sources of inflation. Economists disagree a lot about how tight the connection is between government spending and inflation, but longer-term I think most economists would support a fiscal policy that is more counter-cyclical: meaning, the government should save money when the economy is strong and spend more money when the economy is weak. Instead, we’ve constantly raised government deficits in booms and in busts for the last 25 years.”
Ryan Chahrour – Professor, Cornell University
Is raising interest rates a good or bad solution to control inflation?
“Raising interest rates is neither a good nor bad solution, as it has both positives and negatives, but it is a solution to control inflation. It is positive in that it likely diminishes demand and decreases inflation. It is negative in that it slows down the economy and likely diminishes economic growth.”
Michael Weinberg, CFA – Adjunct Professor, Columbia Business School
“When it comes to the Federal Reserve and using interest rates to fight inflation, we absolutely see it as a tool – but there’s a catch. The big question is how long it actually takes for these changes to show up in the economy, and whether policymakers are ready to accept the lag time. For instance, even though stimulus programs were pulled back, the effects on prices are still being felt. Likewise, raising interest rates to curb inflation doesn’t produce immediate results – it takes time for those higher rates to trickle through the economy. Our concern is that policymakers might not fully appreciate how long these changes take to have an impact. If interest rates stay high for too long, it could slow down the economy in ways that actually hurt more than inflation itself. But here’s the thing: if consumers are still financially stable – say, their wages are growing faster than inflation – then inflation alone shouldn’t be the only yardstick we use to measure economic success or failure. It’s all about balance and understanding the broader picture.”
Patrick Luce – Principal Economist, Stantec Consulting; Part-Time Economics Faculty, University of Tampa, and Jeremy Bess – Principal Economist at Stantec Consulting
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