Americans are still feeling the pinch a year after the inflation rate hit a 40-year high.
Although inflation has slowed, it was still 3.2 percent in July 2023 thanks to the war in Ukraine, labor shortages and the federal government keeping up with interest rate hikes.
According to personal finance website WalletHub, inflation rates differ by cities. To determine how much they differ, WalletHub compared 23 major metropolitan statistical areas across two key metrics related to the Consumer Price Index, also known as inflation. The Consumer Price Index for the latest month Bureau of Labor Statistics data is available, which is two months ago, and one year ago to obtain a snapshot of how inflation changed in the short and long term across the country.
WalletHub’s report reveals that the Washington, Arlington and Alexandria metro area ranks 22nd in inflation changes. The metro area saw a 10 percent decrease in inflation from two months before the latest data, and a 1.80 percent change from this time a year ago.
Metro areas with the biggest inflation problem are Denver, Aurora and Lakewood, Colorado; Atlanta, Sandy Springs and Roswell, Georgia; Detroit, Warren, Dearborn, Michigan; St. Louis, Missouri; Seattle, Tacoma and Bellevue Washington.
Washington D.C. has seen low inflation changes from two months ago and one year ago.
The main factors driving inflation right now are too much money going after the same good and the Federal Reserve’s expansionary monetary policy, according to Professor Linda M. Hooks at Washington & Lee University.
“The Fed is actively slowing its expansionary policy, and it seems to be working to slow inflation, too. But some of the other factors behind this bout of inflation are unusual because they came from the pandemic. These include both the much-discussed supply-chain issues and the large amounts of government spending during the pandemic,” Hook said.
Dr. James L. Swofford, a professor at the University of South Alabama, said the main factor always is money growth in recent years.
“Thus, the inflation has been caused by the central bank (the Fed). Large and growing government budget deficits also put pressure on the Fed to increase money growth, as to cover the deficit, a government must either borrow or print money, and the government worries about borrowing growing too fast,” Swofford said.
Professor Louis J. Maccini at John Hopkins University said that increasing rates and avoiding large primary deficits would continue to slow the rate of inflation.
“The news is encouraging from this point of view, but it might be too early to declare victory,” Maccini said.
Hooks said inflation is “primarily controlled by the Federal Reserve. The Fed has imprecise control, and it takes time to bring down inflation. It is important to give the Fed the time it needs to see how well its contractionary policy is working and to give the Fed some room and independence to make the tough decisions required to control inflation.”
However, is raising interest rates a good or bad solution to control inflation?
“The interest rate increases in the past year were what the Fed needed to do. It is unclear how much more they really need to do, but they want to make sure nobody doubts their commitment to squashing inflation, and that could see them raise a little more from here. The economy seems to have been quite resilient in the face of the monetary tightening so far, which gives the Fed a little breathing room,” Colgate University Associate Professor Dean Scrimgeour said.
Maccini said it was good, because the federal government did not have an alternative strategy.
“However, fiscal policy also needs to be aligned with the goal of low and stable inflation. Increasing rates can backfire if agents perceive that fiscal policy is on an unstable trajectory,” Maccini said.