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US ECONOMY INFLATION

US Inflation Rate by Year from

1929 to 2020
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How Bad Is Inflation? Past, Present, Future

BY KIMBERLY AMADEO Updated December 19, 2018

The U.S. inflation rate by year is the

percent change in prices from one year to
the next, or year-over-year.

The inflation rate responds to each phase

of the business cycle. The first phase Advertisement
•••
is expansion
expansion. That's when growth is
positive, with healthy 2 percent inflation. As the economy expands beyond 3
percent growth, it creates asset bubbles. It creates the second phase, which is
the peak
peak. That's the month when expansion ends and contraction begins.

Inflation will rise to 3 percent or more.

The third phase is contraction

contraction, which is a recession. Inflation falls below
2 percent. During a recession, deflation becomes a threat. The inflation rate falls
into negative territory. The fourth phase is the trough
trough. That's the month when
contraction ends and expansion begins. After that phase, inflation turns positive
again.

Inflation also responds to monetary policy enacted by the Federal Reserve. The
Fed focuses on the core inflation rate because it excludes volatile gas and food
prices. The Fed sets a target inflation rate of two percent. If the core rate rises
much above that, the Fed will execute contractionary monetary policy. This
increases interest rates, shutting down demand and forcing prices lower.

U.S. Inflation Rate History and Forecast

The table below compares the inflation rate with the fed funds rate, the phase of
the business cycle and the significant events influencing inflation.

The most recent forecast is in the "U.S. Economic Outlook."

Year Inflation Fed Business Cycle Events Affecting Inflation

Rate Funds (GDP Growth)
YOY Rate

1929 0.6% NA Aug peak Market crash

1930 -6.4% NA Contraction Smoot-Hawley

(-8.5%)

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1931 -9.3% NA Contraction Dust Bowl
(-6.4%)

1932 -10.3% NA Contraction Hoover tax hikes

(-12.9%)

1933 0.8% NA Contraction FDR's New Deal

ended in March.
(-1.2%)

1934 1.5% NA Expansion U.S. debt rose

(10.8%)

1935 3.0% NA Expansion (8.9%) Social Security

1936 1.4% NA Expansion FDR tax hikes

(12.9%)

1937 2.9% NA Expansion Depression resumes

peaked in May
(5.1%)

1938 -2.8% NA Contraction Depression ended

ended in June
(-3.3%)

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1939 0.0% NA Expansion (8.0%) Dust Bowl ended

1940 0.7% NA Expansion (8.8%) Defense increased

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1941 9.9% NA Expansion (17.7%) Pearl Harbor

1942 9.0% NA Expansion Defense spending tripled

(18.9%)

1943 3.0% NA Expansion

(17.0%)

1944 2.3% NA Expansion (8.0%) Bretton-Woods

1945 2.2% NA Feb peak.Oct Truman ended WWII

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trough (-1.0%)

1946 18.1% NA Expansion Budget cuts

(-11.6%)

1947 8.8% NA Expansion Marshall Plan.Truman Doctrine. Cold

(-1.1%) War

1948 3.0% NA Nov peak (4.1%)

1949 -2.1% NA Oct trough Fair Deal. NATO

(-0.6%)

1950 5.9% NA Expansion (8.7%) Korean War

1951 6.0% NA Expansion

(8.0%)

1952 0.8% NA Expansion (4.1%)

1953 0.7% NA July peak (4.7%) Eisenhower ended Korean War

1954 -0.7% 1.25% May Dow returned to 1929 high

trough (-0.6%)

1955 0.4% 2.50% Expansion (7.1%)

1956 3.0% 3.00% Expansion (2.1%)

1957 2.9% 3.00% Aug peak (2.1%) Recession

1958 1.8% 2.50% April trough Recession ended

(-0.7%)

1959 1.7% 4.00% Expansion (6.9%) Fed raised rates

1960 1.4% 2.00% April peak (2.6%) Recession

1961 0.7% 2.00% Feb trough JFK's deficit spending ended

(2.6%) recession

1962 1.3% 3.00% Expansion (6.1%)

1963 1.6% 3.38% Expansion (4.4%)

1964 1.0% 3.75% Expansion (5.8%) LBJ's Medicare, Medicaid

1965 1.9% 4.25% Expansion (6.5%)

1966 3.5% 5.50% Expansion (6.6%) Vietnam War

1967 3.0% 4.50% Expansion (2.7%)

1968 4.7% 6.00% Expansion (4.9%) Moon landing

1969 6.2% 9.00% Dec peak (3.1%) Nixon took office

1970 5.6% 5.00% Nov Recession

trough (0.2%)

1971 3.3% 5.00% Expansion Wage-price controls

(3.3%)

1972 3.4% 5.75% Expansion (5.3%) Stagflation

1973 8.7% 11.00% Nov peak (5.6%) End of gold standard

1974 12.3% 8.00% Contraction Watergate

(-0.5%)

1975 6.9% 6.50% March trough Stop-gap monetary policy. Fed

(-0.2%) raised rates to fight inflation, then
lowered them to fight recession.
1976 4.9% 4.75% Expansion (5.4%)
Confused businesses kept prices

1977 6.7% 6.50% Expansion (4.6%) high.

1978 9.0% 10.00% Expansion (5.5%)

1979 13.3% 12.00% Expansion (3.2%)

1980 12.5% 18.00% Jan peak (-0.3%) Recession

1981 8.9% 12.00% July trough Reagan tax cut

(2.5%)

1982 3.8% 8.50% November Recession ended

(-1.8%)

1983 3.8% 9.25% Expansion (4.6%) Reagan increased military spending

1984 3.9% 8.25% Expansion (7.2%)

1985 3.8% 7.75% Expansion (4.2%)

1986 1.1% 6.00% Expansion (3.5%) Tax cut

1987 4.4% 6.75% Expansion (3.5%) Black Monday crash

1988 4.4% 9.75% Expansion (4.2%) Fed raised rates

1989 4.6% 8.25% Expansion (3.7%) S&L Crisis

1990 6.1% 7.00% Jul peak (1.9%) Recession

1991 3.1% 4.00% Mar trough Fed lowered rate

(-0.1%)

1992 2.9% 3.00% Expansion (3.5%) NAFTA drafted

1993 2.7% 3.00% Expansion (2.8%) Balanced Budget Act

1994 2.7% 5.50% Expansion (4.0%)

1995 2.5% 5.50% Expansion (2.7%)

1996 3.3% 5.25% Expansion (3.8%) Welfare reform

1997 1.7% 5.50% Expansion (4.4%) Fed raised rate

1998 1.6% 4.75% Expansion (4.5%) LTCM crisis

1999 2.7% 5.50% Expansion (4.8%) Glass-Steagall repealed

2000 3.4% 6.50% Expansion (4.1%) Tech bubble burst

2001 1.6% 1.75% March peak. Nov Bush tax cut. 9/11 attacks
trough. (1.0%)

2002 2.4% 1.25% Expansion (1.7%) War on Terror

2003 1.9% 1.00% Expansion (2.9%) JGTRRA

2004 3.3% 2.25% Expansion (3.8%)

2005 3.4% 4.25% Expansion (3.5%) Katrina. Bankruptcy Act

2006 2.5% 5.25% Expansion (2.9%) Bernanke is Fed Chair

2007 4.1% 4.25% Dec peak (1.9%) Bank crisis

2008 0.1% 0% Contraction Financial crisis

(-0.1%)

2009 2.7% 0% Jun trough ARRA

(-2.5%)

2010 1.5% 0% Expansion (2.6%) ACA. Dodd-Frank

2011 3.0% 0% Expansion (1.6%) Debt ceiling crisis

2012 1.7% 0% Expansion (2.2%)

2013 1.5% 0% Expansion (1.8%) Government shutdown.

Sequestration

2014 0.8% 0% Expansion (2.5%) QE ends

2015 0.7% 0.25% Expansion (2.9%) Deflation in oil and gas prices

2016 2.1% 0.75% Expansion (1.6%)

2017 2.1% 1.50% Expansion (2.2%) Core inflation rate 1.8%.

2018 1.9% 2.5% Expansion (3.0%) Core rate 1.9 %. The current rate is
updated monthly.

2019 1.9% 3.0% Expansion (2.3%) Forecast. Core rate 2.0%

2020 2.1% 3.0% Expansion (2.0%) Forecast. Core rate 2.0%

2021 2.1% 3.0% Expansion (1.8%) Forecast. Core rate 2.0%

Resources for Table

• BLS, Historical Inflation Rate

• U.S. Census Bureau, Percent of Population That Is Unemployed 1929-
1947 Note: This divides the number of people age 14 and over without jobs
into the total civilian population.

• BLS, Unemployment Rate 1948-2015 Note: This divides the number of

unemployed who are actively looking for work into the labor force.

• Historical Targeted Fed Funds Rate

• Effective Fed Funds Rate: St. Louis Federal Reserve (Used to estimate
targeted Fed funds rate before 1971.)

• Recession History
• History of Gold Standard
• NBER, Business Cycle Dates
• BEA, National Income, and Product Accounts Tables: Table 1.1.1. GDP Growth
Rate

• The Fed uses complex computer models to create its forecasts. But so many
variables change in between estimates that it's difficult to be precise three
years out. The critical thing to recognize is that the Fed doesn't think inflation
will be a credible threat any time soon. (Source: "Economic Projections of
Federal Reserve," The Federal Reserve, December 19, 2018.)

More History

• National Debt by Year

• Deficit by Year
• U.S. GDP by Year
• GDP Growth by Year
• Unemployment Rate by Year
• Gold Prices by Year

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