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The U.S. inflation rate hit a 40-year high after the pandemic but has since cooled significantly due to factors like the Federal Reserve rate hikes. The year-over-year inflation rate sits at 2.9% as of August 2025, which is still above the target rate of 2%. Various factors, such as the war in Ukraine, labor shortages and recent tariffs, drive this higher than average inflation. Despite the country not meeting its target yet, the Federal Reserve will keep interest rates at the level set in December 2024.
Inflation rates differ across the U.S., though. To determine how inflation is impacting people in different parts of the country, WalletHub compared 23 major MSAs (Metropolitan Statistical Areas) across two key metrics related to 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.
Cities With the Biggest Inflation Problems
| Overall Rank | MSA | Total Score | Consumer Price Index Change (Latest month vs 2 months before) |
Consumer Price Index Change (Latest month vs 1 year ago) |
|---|---|---|---|---|
| 1 | Tampa-St. Petersburg-Clearwater, FL | 89.39 | 1.10% | 3.30% |
| 2 | San Diego-Carlsbad, CA | 89.29 | 0.80% | 4.00% |
| 3 | Philadelphia-Camden-Wilmington, PA-NJ-DE-MD | 67.97 | 0.50% | 3.30% |
| 4 | Anchorage, AK | 65.04 | 0.80% | 2.40% |
| 5 | Los Angeles-Long Beach-Anaheim, CA | 64.39 | 0.40% | 3.30% |
| 6 | Chicago-Naperville-Elgin, IL-IN-WI | 61.36 | 0.40% | 3.10% |
| 7 | Riverside-San Bernardino-Ontario, CA | 60.28 | 0.20% | 3.50% |
| 8 | New York-Newark-Jersey City, NY-NJ-PA | 59.31 | 0.30% | 3.20% |
| 9 | Phoenix-Mesa-Scottsdale, AZ | 53.46 | 0.90% | 1.40% |
| 10 | Baltimore-Columbia-Towson, MD | 53.25 | 0.30% | 2.80% |
To gain a deeper understanding of current inflation trends and what they mean for our economy, WalletHub turned to a panel of experts. Feedback below from one of the experts is listed below. The questions they were asked included:
- What are the main factors currently driving inflation?
- What can be done to continue to slow down inflation?
- Is raising interest rates a good or bad solution to control inflation?
- What does the current inflation rate tell us about the future of the economy?
Shawn Ritenour
Professor of Economics - Grove City College
What are the main factors currently driving inflation?
If, by inflation, you mean an increased level of overall prices, then there is one and only one cause: an increase in the money supply that is greater than the demand to hold money. That is what has been happening generally since January of 2020. Our current money supply is approximately $20 Trillion. Of that about $5 Trillion (or 1/5 of the total) has been created over the past five years. That is monetary inflation of historic proportions. With such an increase, many people experience an excess supply of money, meaning they are holding more than they would like at the current purchasing power of money. People, therefore, increase their spending, which increases the demand for producer and consumer goods, which, therefore, increase their prices.
Tarrifs and other forms of interventions may make some goods more costly, but as people spend more money on those goods, they must spend fewer dollars on other goods, lowering their prices. The only way for overall prices of goods in general to increase is for a relative increase in the money supply.
What can be done to continue to slow down inflation?
The only thing that can be done to slow down inflation is to stop increasing the supply of money.
Is raising interest rates a good or bad solution to control inflation?
Raising interest rates per se is not the key. What is needed is for the Federal Reserve and the commercial banks it supports to stop increasing the money supply. Now, in our current system, banks increase the money supply via credit expansion, which results in lower interest rates as banks encourage people to borrow. The lower interest rates, however, are driven by the desire to increase loans, so as to increase the money supply. To stop price inflation, we need to stop monetary inflation. We need to stop increasing the money supply through credit expansion. This would result in higher interest rates than there would be with more credit expansion, but the important thing is what happens to the money supply, not to interest rates.
What does the current inflation rate tell us about the future of the economy?
SR: It tells us that there is likely trouble ahead. The higher overall prices are symptoms of past monetary inflation through credit expansion. The increased lending is not funded by increases in saving, but by money created by the Federal Reserve and commercial banks. As such, the inflation has facilitated malinvestment on projects that are not sustainable. Spending funded by monetary inflation does not result in true economic prosperity in the form of more goods to satisfy our ends. It encourages investment that does not reflect the wishes of society. Rather, investors are encouraged to invest in industries that are too capital-intensive relative to the wishes of savers in society. Such malinvestment fuels investment bubbles. Bad investments must eventually be liquidated, which means a recession is ahead. How soon is hard to tell.
Source: Wallethub
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