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: Inflation hit rural, Hispanic, and Black people harder for one key reason

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People living in rural areas were especially hammered by higher-than-average consumer prices earlier in the pandemic, experiencing an inflation rate that was 2 percentage points above urban households in February 2022, researchers at the Federal Reserve Bank of New York said in a series of blog posts Wednesday. 

The disparity can largely be attributed to people in more remote parts of the U.S. devoting a larger share of their spending toward transportation, a sector that was rattled by a spike in used car costs and volatile gas prices in 2021 and 2022, the New York Fed researchers said in their analyses. 

Similarly, soaring consumer prices had previously affected Black, Hispanic, and middle-income households more severely between early 2021 and June 2022, when the annual inflation rate peaked at 9.1%, due to those groups spending more on transportation. (Notably, rural America has become more diverse in the past decade, driven in part by growth in the rural Latino population, according to the Brookings Institution.

As transportation costs have moderated, however, the earlier disparities in inflation rates have narrowed, too, the New York Fed researchers said. In fact, by December 2022, rural inflation was below the national average, and the inflation rate for Hispanic households was 0.27 percentage points above the national average, compared to a more severe disparity of 1.5 percentage points in June 2021. 

Black households, which saw a 1 percentage point-difference in their inflation rate compared to the national average in February 2022, were also living with a lower-than-average inflation rate in December 2022, along with white households.

“Inflation disparities, having widened as inflation rose sharply in 2021 because of differing exposures to transportation costs across demographic and income groups, are now narrowing as transportation inflation converges toward average inflation,” New York Fed researchers Rajashri Chakrabarti, Dan Garcia, and Maxim Pinkovskiy said in a blog post about disparities in inflation by income and race Wednesday. 

These days, inflation is higher for Asian and Pacific Islander households compared to the overall average, the New York Fed said. Inflation for middle-income households more generally has also migrated below the national average, with low-income households experiencing the most hardship today, the researchers said. 

Younger people without a college degree, who saw higher inflation rates relative to the overall average between early 2021 and June 2022, have also seen their disparities shrink. As of December, no-college households were living with lower inflation rates, the New York Fed said, and “older households currently experience slightly higher inflation than younger households do, with prime-age households’ inflation rate being below the national average.”

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