With the year-over-year inflation rate at 3.4% in December, the personal-finance website WalletHub today released its report on the Changes in Inflation by City. According to the analysis, Phoenix is the city with the 22nd lowest inflation problem.
“Inflation, once started, is difficult to extinguish quickly,” says Burton Abrams, professor emeritus, University of Delaware; and Research Fellow, The Independent Institute. “I liken the economy to a large ocean liner that is hard to slow down once it gets momentum. The Federal Reserve has tightened monetary policy substantially, but this takes time for it to work its way through the system. Also, wage ‘catch-ups’ in the auto industry and elsewhere add to increased price pressure. Deficit spending by the Federal government has kept upward pressure on prices as well. These, however, are not causes of long-term inflation – excessive monetary policy is. All told, contractionary monetary policy has slowed aggregate spending relative to aggregate supply moderating the inflation rate.”
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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.
Inflation Problem in Phoenix (1=Worst, 12=Avg.):
- Overall rank for Phoenix: 22nd
- 22nd – Consumer Price Index Change (Latest month vs 2 months before)
- 19th – Consumer Price Index Change (Latest month vs 1 year ago)
“The current inflation rate of 3.4% bodes well for the future of the economy as it suggests the Fed will not have to confront inflation in the extreme way that, for example, Paul Volker did in the early 1980s,” says Daniel C. O’Neill, Professor; Chair of the School of International Studies, University of the Pacific. “While I believe the Fed could have been more aggressive in raising interest rates earlier to mitigate the recent rise in inflation, it has handled the situation very well. My outlook for the US economy is bright, although the 2024 election could have major impacts that we cannot yet foresee.”
For the full report, visit https://wallethub.com/edu/cities-inflation/107537
