(The Center Square) – The Minneapolis-St. Paul-Bloomington, Minnesota-Wisconsin metropolitan statistical area is experiencing the ninth-highest rise in inflation among the 23 metropolitan areas ranked throughout the nation, WalletHub reported Tuesday.
WalletHub created its rankings by equally weighing the consumer price index of the latest month available compared with two months before and compared with one year ago.
WalletHub Communications Manager Diana Polk told The Center Square in an email Wednesday that MSAs with data available from July 2022 are compared with their data from May 2022 and May 2021 while those with data available from August 2022 are compared with June 2022 and June 2021.
The Minnesota-Wisconsin MSA’s latest Consumer Price Index for All Urban Consumers (CPI-U) data available is from July 2022. The U.S. Bureau of Labor Statistics’ Midwest Information office posted it Aug. 10. The Minnesota-Wisconsin MSA’s CPI-U rose 1.2% for the two months ending in July. In the past year, the MSA’s CPI-U rose 8.2%. The Minnesota-Wisconsin MSA tied for fourth for highest CPI increase in the latest month compared with two months ago.
Among the 23 MSAs included in the report, Phoenix-Mesa-Scottsdale, Ariz., had the highest inflation rise. Its latest data was from the two months ending in August. Prices increased 0.8% for the two months ending in August 2022. CPI-U increased 13% in the past year.
Creighton University Heider College of Business Professor Robert Johnson said in the report that the two biggest factors driving inflation today are the supply chain issues and Russia’s invasion of the Ukraine. Transportation costs have risen while fertilizer is in short supply and harvests are lower because of lower supply from Ukraine, he said.
Johnson said raising interest rates is a good solution for controlling inflation since raising the cost of lending slows demand for goods. He said monetary policy during the pandemic put “unprecedented liquidity” into the financial markets, which contributed to inflationary pressures.
“That isn’t to say it wasn’t prudent or necessary, as the economy needed the monetary boost to prevent a significant downturn and needed the boost to maintain employment levels,” Johnson said. “The Federal Reserve has indicated that it is serious about fighting inflation and is undertaking a much more restrictive stance, focusing on the stable price portion of its dual mandate. Raising rates may have a negative impact on the employment picture but given that we are at historical lows in terms of unemployment rates, these actions seem warranted.”
Creighton University MacAllister Chair and Professor of Economics Ernie Goss said in the report that stimulus programs and the Federal Reserve’s expansion of money supply account for inflation. He said that if American consumers and businesses hadn’t increased savings and cash balances, the inflation rate would have been greater.
He said the Fed needs to remove its money supply stimulus by tapering its balance sheet. The Fed must also raise short-term interest rates by another 1 percentage point by 2023 to move the fund rates back to neutral, he said.
“At this point in time, fiscal policy is not even in Congress's or the Administration's toolkit. Witness Biden's continued overspending (e.g., student loan forgiveness),” he said. “It is evident that fiscal policy will be in fact contrary to tackling the problem, thus forcing the Fed to be more aggressive in raising interest rates.”