Why Has Inflation Been Higher in Chicago Than in the U.S. Overall Recently?
Why Has Inflation Been Higher in Chicago Than in the U.S. Overall Recently? (DOI: https://doi.org/10.21033/cfl-2025-508) and Why Has Inflation Been Lower in Detroit Than in the U.S. Overall Recently? (https://www.chicagofed.org/publications/chicago-fed-insights/2025/detroit-inflation) were written by Leslie McGranahan in 2025. They were published in Chicago Fed Insights.
Compared to the national average (2.4%), inflation was 0.9% higher in Chicago from June 2024-May 2025. The gap was consistent throughout that period. By contrast, for a majority of months since December 2018, Chicago has seen lower inflation than the national average.
Comparing Chicago's inflation to that of the 26 other urban areas which are reported on by the BLS, a similar pattern emerges. Chicago has been in the top decile in 2025, but for the majority of months since 2018 it was below the median.
Picturing inflation instead as a cumulative price adjustment since January 2021, there has been a persistent gap between Chicago and the nation, but it has begun to close. Chicago is still below the median cumulative inflation among urban areas.
The author investigates the sources of inflation by collecting the weights assigned to each expenditure category (nationally and in Chicago) and the relative inflation of these categories (again, nationally and in Chicago). "To determine whether expenditure weights or category price changes are more important, I generate two counterfactuals. The first counterfactual is what inflation would be if an area had U.S. expenditure weights and Chicago price changes by category. And the second counterfactual is what inflation would be if an area had Chicago expenditure weights and U.S. price changes by category." This reveals that transportation costs, specifically in the motor vehicle expenses category, are the driving factor for the Chicago-U.S. gap. It also reveals that, from 2022-2024, housing was generally pulling inflation lower in Chicago compared to the national average, while in 2025 it has been much higher.
Consider now Detroit, where inflation from September 2024-August 2025 was 2.2% lower than the national average (0.7% vs 2.9%). For the vast majority of months since June 2022, Detroit saw higher inflation than the national average.
Comparing Detroit's inflation to that of other urban areas, it has been below the 20th percentile of for 2025, but was generally above the median since 2021.
Using the cumulative inflation view, Detroit developed a higher rate in January 2023. This gap narrowed in late 2024 but is still present.
Investigating the sources of inflation, Detroit's high inflation in 2023 was driven by new and used vehicle prices, while the low inflation in the last year has been driven by housing (esp. shelter prices).