Baltimore Is the City With the Highest Inflation Problem – WalletHub Study
With the year-over-year inflation rate at 2.4% in March, 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.
Inflation Problem in Baltimore (1=Worst, 12=Avg.):
- Overall rank: 1st
- 2nd – Consumer Price Index Change (Latest month vs 2 months before)
- 5th – Consumer Price Index Change (Latest month vs 1 year ago)
For the full report, please visit:
https://wallethub.com/edu/
Key takeaways and WalletHub commentary are included below in text and video format.
Expert Commentary
What are the main factors currently driving inflation?
“The main drivers include many supply shocks, such as supply chain problems and the bird flu which is affecting the price of eggs. Our current trade problems also exacerbate the problem. Many parts of the labor market are experiencing shortages, which makes hiring more expensive. Finally, increased aggregate demand due to increased government spending are another driver of inflation.”
James A Thorson – Chair, Department of Economics, Southern Connecticut State University
“I would say there are four main factors driving the current situation. One factor is the tariffs imposed on foreign-manufactured and primary goods. Tariffs create an adverse supply shock and will most likely be inflationary in the short term. There is also a strong element of uncertainty related to the erratic behavior of the Trump administration in imposing and then reversing tariffs. Federal Reserve Chairman Jerome Powell has noted that tariffs and the uncertainty surrounding them are contributing to inflationary pressures and will likely make it harder for the Fed to pursue its mandate of price stability. Another driver of high prices is the housing market, which shows no signs of easing. It appears that housing costs, which contribute significantly to CPI inflation, are driven by supply shortages. A third issue concerns food prices – eggs being a striking example. High egg prices are due to a devastating avian flu season. For instance, it is not uncommon for supermarkets here in Colorado to ration egg purchases to one dozen per customer to prevent prices from climbing further. A fourth factor is energy prices. According to the Bureau of Labor Statistics (BLS), electricity costs have risen by 2.5% year-over-year, and natural gas prices have increased by 6% over the past 12 months. Despite a 0.2 percentage point decrease in the energy index, energy costs continue to contribute to inflationary pressures.”
Daniele Tavani – Professor and Chair, Department of Economics, Colorado State University
Is raising interest rates a good or bad solution to control inflation?
“Raising interest rates is one of the most effective and widely used tools for controlling inflation. When interest rates rise, people are encouraged to save more rather than spend, while borrowing becomes more expensive. For example, when mortgage interest rates are high, individuals may delay purchasing a house or a car. In general, higher interest rates reduce spending on goods and services, lowering demand and slowing price increases. Conversely, when interest rates are low, people tend to save less, borrow more, and spend more, which increases demand for goods and services and pushes prices higher. By adjusting interest rates, the Fed can influence inflation. However, not all price changes can be controlled this way. For instance, fuel prices are largely determined by international markets, leaving the Fed with little or no control over them. Similarly, fiscal policies, such as government-imposed tariffs on imports, can drive up prices independently of monetary policy.”
Vidhura S B W Tennekoon – Assistant Professor, Indiana University
“Raising interest rates is necessary to combat high inflation but it might not be the best choice depending on where we land in 2025. Higher rates have the negative effect of making it more expensive to take loans, which depresses investment and contracts the economy. There is an increasing chance of stagflation in 2025, which is an economic period of contraction (recession) with inflation. This would put policy makers in a difficult position because stimulating the economy to combat recessionary forces is inflationary and policies that target inflation are recessionary. Ultimately, there is not a simple answer to this question as changing interest rates has its own set of consequences that need to be properly weighed given the economic environment as it presents itself.”
Dr. Matthew Kidder – Chief Economist, Chain Link Fence Manufacturers Institute; Assistant Professor, Newberry College; Chief Operating Officer, International Trade and Finance Association
What does the current inflation rate tell us about the future of the economy?
“Over the past two years, inflation has slowed significantly and is now closer to the Fed’s long-term 2% target. Typically, policies aimed at lowering inflation come with the risk of higher unemployment and slower economic growth. However, recent economic trends suggest that inflation is moderating without a significant rise in unemployment. As of February 2025, unemployment remains at a healthy 4.1%, while the economy continues to grow at a steady pace. The Fed is expected to guide inflation toward 2% using its available tools, though recent tariff increases may slow this progress by driving up prices on imported goods. This also suggests that interest rates will gradually decline, easing borrowing costs for consumers and businesses.”
Vidhura S B W Tennekoon – Assistant Professor, Indiana University
“Inflation informs us about what the dollar may be worth in the future. The expectation of inflation is thus very important to lenders and borrowers. Lenders give out money now in hope of receiving more money back in the future. You can think of the value of this future money as being nibbled away on by a mouse called inflation. So now, consider that lenders want a real rate of return for a given risk and set their advertised rate, the rate you borrow at, that accounts for lenders expectations on how hungry that inflation mouse is. In summary, higher inflation expectations support higher advertised interest rates from lenders, and this can counter balance rate cuts from the Fed. In other words, it is entirely possible for rate cuts from the Fed to not transmit into lower lending rates if lenders have expectations of higher inflation in the future.”
Dr. Matthew Kidder – Chief Economist, Chain Link Fence Manufacturers Institute; Assistant Professor, Newberry College; Chief Operating Officer, International Trade and Finance Association