The Five Cities Least Impacted by Inflation

Inflation is hitting Americans across the country when it comes to their monthly spending habits, with everything from groceries, housing and gas remaining high in cost.

As the inflation rate hovers at 3.7 percent for September, not all cities have been affected by the higher costs equally.

Miami, Florida, held the record for most inflation while Baltimore was the best city to avoid inflated prices, according to a report compiled by WalletHub comparing the 23 top metropolitan areas last month.

The top five cities with the greatest inflation problem were as follows: Miami, Florida; Tampa, Florida; Riverside, California; San Diego, California; and Atlanta, Georgia.

Miami saw the highest consumer price index change since last year, at 7.8 percent, with Tampa trailing a bit after at 6.7 percent.

Meanwhile, the best cities for escaping inflation and its sky-high prices were Baltimore, Maryland; Phoenix, Arizona; St. Louis, Missouri; Chicago, Illinois; and San Francisco, California.

Baltimore had a year-over-year inflation rate of 3.1 percent, while Phoenix and St. Louis had 3.7 and 3.1 percent respectively.

As for why some cities have remained more protected from inflation than others, economists believe housing is a key issue.

For Miami specifically, housing prices surged 12.5 percent since August 2022, the Bureau of Labor Statistics reported.

"Housing accounts for about 40 percent of the CPI, and it's the biggest pricing differential across metro areas," PNC chief economist Gus Faucher told CNBC. "We've seen much stronger house price growth in Miami, so that means higher inflation there relative to other areas that have more stable housing markets."

What's Driving Inflation

Many factors are at play in driving the high levels of inflation Americans continue to experience, according to Barry Bluestone, a professor at Northeastern University.

Supply chain constraints are key in the current inflation in America, he said, with an inadequate supply of energy resources driving up the cost of gasoline.

"In addition to energy costs and transportation constraints, an inadequate supply of housing in many locales has led to a spike in rents contributing to overall inflation," Bluestone told WalletHub.

At the same time, when the pandemic hit, many governments adopted their own monetary and fiscal strategies to keep the economy afloat—namely stimulus payments.

These stimulus payments contributed to a flush of money in the economy, leading to later bouts of inflation.

"The end of the shutdowns unleashed pent-up demand and consumers, flush with savings and stimulus dollars, went on spending sprees," Steven Lanza, an associate professor at the University of Connecticut, said. "Meanwhile, supply chains were slow to reopen and couldn't keep pace with growing demand. With 'too much money chasing too few goods' prices soared."

The Federal Reserve has consistently raised interest rates in an effort to bring down inflation, but inflation remains at 3.7 percent nationally.

"As supply chains have been largely restored and federal pandemic spending has ended, the upward pressure on prices has eased. But equally important, the Federal Reserve, which controls the nation's money supply, has hit the brakes hard, reducing the money supply and raising key interest rates," Lanza said.

Inflation nearly reached 9 percent last summer but has fallen around five percentage points, indicating Americans are on a more positive trajectory moving forward, but there's still work to be done.

"Many observers assumed that the Fed's current contractionary policy would necessarily produce a recession, but so far, the economy has dodged that bullet," Lanza said. "The effects of monetary policy are, notoriously, felt 'with long and variable lags,' so we're not necessarily out of the woods yet."