The History of US Inflation, 1913 to 2026

The Federal Reserve Act was signed in December 1913, the first year the CPI covers. Prices rose 1.0% in both 1914 and 1915, then 7.9% in 1916 as European war orders built. After the United States entered the war in 1917, federal borrowing and a fast-growing money supply pushed inflation to 17.4% that year and 18.0% in 1918, the highest annual rate in the record. Prices kept climbing after the armistice: 14.6% in 1919 and 15.6% in 1920.

Then they fell. Wartime spending ended, the Federal Reserve raised its discount rate sharply in 1919 and 1920, and the economy entered a recession that the National Bureau of Economic Research dates from January 1920 to July 1921. The annual-average CPI fell 10.5% in 1921 and another 6.1% in 1922. The downturn was severe but short, and it was later cited by those who argued that a deflation left alone would correct itself. The 1930s weakened that argument.

The annual-average CPI fell from 17.1 in 1929 to 13.0 in 1933, a drop of 24.0%, with declines of 9.0% in 1931 and 9.9% in 1932. Falling prices raised the real burden of every debt fixed in dollars just as wages, farm incomes, and asset values collapsed. Borrowers defaulted, banks that had lent to them failed, and the failures cut the money supply further.

Irving Fisher described this loop in his 1933 paper “The Debt-Deflation Theory of Great Depressions”. The policy response, including federal deposit insurance in 1933 and the end of the domestic gold standard, and the later scholarship blaming the Fed for letting the money supply shrink, shaped how central banks behave in crises. The Fed’s readiness to cut rates and expand its balance sheet quickly in 2008 and 2020 traces directly to this period.

Inflation reached 10.9% in 1942 before the Office of Price Administration’s controls took full hold; rates then fell to 1.7% in 1944 and 2.3% in 1945. When most controls ended in 1946, demand that rationing had held back met an economy still converting from war production. Prices rose 8.3% in 1946, 14.4% in 1947, and 8.1% in 1948, then dipped 1.2% in 1949.

The Korean War brought a 7.9% jump in 1951. From 1952 through 1965, annual inflation never exceeded 3.3%, and prices fell 0.4% in 1955. That stretch of strong growth with stable prices is the baseline against which the next two decades were judged.

Inflation climbed from 1.6% in 1965 to 5.7% in 1970, and the 1970s as a whole averaged 7.1% a year. The main causes were a Federal Reserve that eased whenever unemployment rose and held its policy rate below inflation from 1974 through 1977, the end of the dollar’s convertibility into gold in 1971, and two oil shocks. Inflation reached 11.0% in 1974 and peaked at 13.5% in 1980, the highest since 1947.

Paul Volcker, Fed chairman from August 1979, let short-term rates rise until the effective federal funds rate averaged 19.1% in June 1981. The economy went through recessions in 1980 and 1981–82, and annual inflation fell to 3.2% by 1983. Our guide to the 1970s stagflation covers the causes, the price controls, unemployment, and the Volcker disinflation year by year.

From 1983 through 2020, annual inflation compounded to an average of 2.6% a year. Economists credit much of that stability to the credibility the Fed earned in the early 1980s: when households and businesses expect low inflation, they set wages and prices in ways that keep it low.

Oil price spikes pushed inflation to 5.4% in 1990 and 3.8% in 2008, and prices fell 0.4% in 2009, the first annual decline since 1955. After the financial crisis the Fed held its policy rate near zero from December 2008 to December 2015, and in January 2012 it adopted an explicit 2% inflation goal. Even so, from 2010 through 2019 annual CPI inflation rose above 2.5% only once, to 3.2% in 2011. Many economists concluded that aging populations, global supply chains, and cheaper technology had pushed inflation and interest rates down for good.

Inflation was 1.2% in 2020 as lockdowns cut spending. Then federal relief spending of roughly $5 trillion (the CARES Act, the December 2020 relief bill, and the American Rescue Plan) reached households at the same time as factory shutdowns and port backlogs limited the supply of goods, and spending shifted from services toward those goods.

Annual inflation reached 4.7% in 2021 and 8.0% in 2022, the highest since 1981. The Fed began raising rates in March 2022 and reached a 5.25–5.5% target range in July 2023. Inflation slowed to 4.1% in 2023 without a recession. The surge left the annual-average price level in 2023 17.7% higher than in 2020, and that increase does not reverse when inflation slows.

Annual inflation was 2.9% in 2024 and 2.6% in 2025. The Fed began cutting rates in September 2024 as shelter costs, which reflect new leases with a lag, and services prices cooled from their 2022 and 2023 pace.

2026 figures are partial. The average index for January–September 2026 was 3.2% above the 2025 annual average, still above the Fed’s 2% goal. Monthly year-over-year readings, which BLS publishes each month, can differ from this year-to-date comparison by several tenths of a point.

Across the full CPI record, the large increases line up with wars, oil shocks, and periods when the Fed kept rates below inflation. The large declines all came before 1940; since then the only annual drops were small ones in 1949, 1955, and 2009. The longest stable stretch, 1983 to 2020, followed the Fed’s shift to putting inflation first.

The practical consequence is that a dollar figure from the past needs its year attached. A $5,000 salary meant something different in 1950 than in 1980, because prices more than tripled in between. Converting old amounts with the CPI for the right years turns that kind of comparison into arithmetic.