3 things to know about the Twin Cities' 3% inflation

Inflation is proving stubborn in the Twin Cities and across the country.

The consumer price index (CPI) in the Minneapolis-St. Paul region rose 3% year-over-year in January, mirroring the U.S. as a whole, according to federal data released Wednesday.

It’s a far cry from the more than 8% inflation of 2022 but far enough from the Federal Reserve’s 2% target to cause concern — especially considering tariffs under President Donald Trump, which aren’t yet impacting the data, but could push prices higher.

“Overall, price pressures are building, especially on items that are very visible to consumers,” said Satyam Panday, Chief U.S. and Canada Economist at S&P Global Ratings.

Here are three things to know about these latest inflation numbers:

Local inflation has been lower than the U.S. since May 2022. In August 2023, the Twin Cities’ 1% CPI was the lowest of any metro area.

The one outlier was July, when the Twin Cities experienced a 3.5% CPI bump compared to 2.9% nationwide.

“The big thing that stuck out to me was really the similarity after a couple of years of focusing on the differences,” said Joe Mahon, regional outreach director at the Federal Reserve Bank of Minneapolis. “Minneapolis-St. Paul is coming right in at the national average, and that’s not necessarily a good or a bad thing.”

Drill down into the line items and the story becomes more complicated.

Gasoline inflation was higher in the Twin Cities in January, rising 6.3% year-over-year compared to a 0.2% drop nationwide. Clothing price increases also rose locally while falling nationally.

At the same time, jumps in housing and medical costs — two major parts of many consumer budgets — were lower in the Twin Cities than the U.S. as a whole.

“Even though overall inflation is the same here, people are experiencing it in different ways,” Mahon said.

Economists predicted the Wednesday report would clock a year-over-year CPI increase of 2.9%, which, on its face, is pretty close to the actual 3% reading.

But one concerning aspect of that number, Mahon said, is the higher month-to-month change that contributed to it. The national CPI rose 0.5% from December to January, up from 0.4% the prior month. In the Twin Cities, the increase was 1.5% for the two months ending in January.

“You don’t want to over-interpret one month of data,” Mahon said. “But if you start to see an accumulation of higher monthly numbers, eventually, that adds up to a higher inflation rate.”