With the year-over-year inflation rate at 3% in January, 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. Chicago, IL 2. San Diego, CA | 19. Seattle, WA 20. San Francisco, CA |
| 3. Boston, MA | 21. Anchorage, AK |
| 4. Honolulu, HI | 22. Phoenix, AZ |
| 5. Riverside, CA | 23. Houston, TX |
To view the full report and your city’s rank, please visit:
https://wallethub.com/edu/
Expert Commentary
What can be done to continue to slow down inflation?
“In order to reduce inflation, adjustments must be made to monetary and fiscal policies. The Fed has adjusted monetary policy which has helped to undo much of the earlier excessive stimulus. As a result, inflation has declined. They will need to hold this course if they want to push inflation lower. Fiscal policy adjustment will also help.”
Robert Krol – Professor, California State University, Northridge
“To tackle inflation further, we need to address the main factors driving it – like past increases in money supply, federal spending, and tight labor markets – and find policies that counteract these pressures. The Fed’s been working to curb inflation with tighter monetary policy, but it hasn’t been without some costs. We wonder how many readers have thought about purchasing a home recently only to be sticker shocked after they looked at their interest payment. At the same time, continued federal deficit spending is keeping inflation high, making it harder for the Fed to make progress. If we cut back on government spending, it might slow down the economy a bit, but it would help reduce inflation by easing some of the demand. But here’s the thing: While monetary and fiscal policy matter, the real long-term solution could come from boosting productivity. Technology – especially AI – can help make things more efficient and ease the pressure on the job market. We talk a lot about AI, but there are other tech advancements that could be done too, like robotics. Think autonomous vehicles and smart home robots that could save people time, increase productivity, and get more people into the workforce. If AI sounds too out of reach and much like The Jetsons, then maybe Biotech is worth some attention. If we can help people live healthier, longer lives, it could ease labor shortages and help reduce inflation in the long run. In short, while tweaking monetary and fiscal policies is necessary, tech and biotech are key to solving inflation in a sustainable way.”
Patrick Luce – Principal Economist, Stantec Consulting; Part-Time Economics Faculty, University of Tampa & Jeremy Bess: Principal Economist, Stantec Consulting
Is raising interest rates a good or bad solution to control inflation?
“Interest rate adjustments and the corresponding changes in the money supply are the primary way to control inflation. Cities have no control over these actions. The best way for cities to influence their cost of living is to have a regulatory and tax framework that encourages businesses to be created and expand. Labor market flexibility would also help. They can minimize barriers to housing construction.”
Robert Krol – Professor, California State University, Northridge
“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 & Jeremy Bess: Principal Economist, Stantec Consulting
What does the current inflation rate tell us about the future of the economy?
“I don't think the current inflation rate is a good predictor of future economic performance. However, it can lead to monetary policy mistakes that can harm the economy.”
Robert Krol – Professor, California State University, Northridge
“The persistence of ‘sticky’ prices shows that consumer purchasing power and demand remain strong. This presents a challenge for the Federal Reserve as it grapples with its dual mandate. The Fed must decide whether to tolerate higher inflation or take a more restrictive approach.Each option has its own consequences. A less accommodative Fed would likely mean higher interest rates, which could worsen affordability in housing and put pressure on manufacturing returns. On the other hand, allowing higher inflation could erode household wealth over time, reducing consumption and risking long-term economic stability. For now, it's a positive sign that the US consumer remains relatively healthy after such uncertainty. Federal spending has helped, but consumer debt is manageable, and wages are rising. The ‘stickier’ prices reflect that consumers still have purchasing power, helping to sustain demand. For now, the consumer reflects someone who can still enjoy one more drink after the company party ends and all of the drink tickets run out.”
Patrick Luce – Principal Economist, Stantec Consulting; Part-Time Economics Faculty, University of Tampa & Jeremy Bess: Principal Economist, Stantec Consulting
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