Inflation Rate History
Historical U.S. inflation rates from the Great Inflation to COVID-era surge, how CPI is measured, purchasing power calculator, and strategies to protect against inflation
Key Numbers
Current CPI
2.7% (Dec 2025)
Fed Target
2%
2022 Peak
9.1%
$100 in 2000
$185 Today
Inflation measures how much prices increase over time, reducing the purchasing power of each dollar. The Federal Reserve targets 2% annual inflation — enough to encourage economic activity without eroding savings too quickly. The Bureau of Labor Statistics (BLS) tracks inflation using several measures.
How Inflation Is Measured
| Measure | What It Includes | Used For |
|---|---|---|
| Headline CPI | All items including food & energy | Actual cost-of-living impact |
| Core CPI | Excludes volatile food & energy | Underlying inflation trend |
| PCE | Personal Consumption Expenditures | Fed’s preferred measure |
CPI Basket Weights
| Category | Weight | Includes | Jan 2026 YoY |
|---|---|---|---|
| Shelter | 36% | Rent, owners’ equivalent, utilities | +3.0% |
| Transportation | 15% | Vehicles, gas, insurance, fares | +1.1% |
| Food & Beverage | 13% | Groceries, dining out | +2.9% |
| Medical Care | 8% | Insurance, services, drugs | +3.2% |
| Recreation | 6% | Entertainment, electronics, sports | +2.5% |
| Education & Communication | 6% | Tuition, phone, internet | +1.4% |
| Energy | 7% | Gasoline, electricity, natural gas | −0.1% |
| Other | 9% | Apparel, personal care, other | — |
Why the Fed targets 2%, not 0%: Deflation (falling prices) can trigger a downward spiral — consumers delay purchases, businesses cut wages, and demand collapses. Moderate 2% inflation encourages spending while keeping prices relatively stable.
Historical Inflation Rates
U.S. inflation has ranged from double-digit spikes during wars and oil crises to near-zero rates during recessions. The table below summarizes the major inflationary periods that shaped Federal Reserve policy.
Major Inflation Eras
| Period | Peak / Avg | Key Drivers |
|---|---|---|
| WWI (1917–1920) | 23.7% | War spending, supply disruptions; sharp deflation followed in 1921 |
| WWII (1942–1948) | 19.7% | Price controls during war; pent-up demand surge after removal |
| Great Inflation (1965–1982) | 14.8% | Vietnam spending, oil shocks, loose policy; ended by Volcker raising rates to 20% |
| Great Moderation (1983–2007) | 3.0% avg | Fed credibility established; globalization kept goods prices low |
| Post-Financial Crisis (2008–2020) | 1.7% avg | Consistently below 2% target; weak demand, falling energy prices |
| COVID Era (2021–2023) | 9.1% | Supply chains, fiscal stimulus, energy shocks; Fed hiked to 5.5% |
Annual Inflation Rates (2015–2025)
| Year | CPI (Dec YoY) | Context |
|---|---|---|
| 2015 | 0.1% | Oil price collapse |
| 2016 | 1.3% | Below target |
| 2017 | 2.1% | At target |
| 2018 | 2.4% | Slightly above target |
| 2019 | 1.8% | Below target |
| 2020 | 1.2% | COVID recession |
| 2021 | 4.7% | Inflation surge begins |
| 2022 | 8.0% | 40-year high; Fed hikes begin |
| 2023 | 4.1% | Declining but elevated |
| 2024 | 2.9% | Continued normalization |
| 2025 | 2.7% | Approaching target (Dec) |
Annual rates based on December-over-December CPI-U. Source: Bureau of Labor Statistics.
Recent Inflation & Fed Response
The 2021–2023 inflation surge was the most significant since the early 1980s, driven by a convergence of supply-side and demand-side shocks. The Fed responded with the most aggressive rate-hiking cycle in four decades.
Causes of the 2021–2023 Spike
| Factor | How It Drove Inflation |
|---|---|
| Supply Chain Disruptions | COVID shutdowns halted manufacturing; container shipping backed up; chip shortages hit autos and electronics |
| Fiscal Stimulus | 2020–21 stimulus totaled 4× the 2008 response (as % of GDP); M2 money supply rose 42% in 22 months |
| Energy Price Shock | Russia–Ukraine war disrupted global oil and gas markets; U.S. gas prices hit $5/gal in mid-2022 |
| Demand Shift | Spending swung from services to goods (home offices, electronics); production couldn’t keep pace |
Federal Reserve Rate Timeline
| Date | Fed Funds Rate | Action |
|---|---|---|
| Mar 2020 | 0–0.25% | Emergency cut to near-zero for COVID |
| Mar 2022 | 0.25–0.50% | First rate hike; tightening cycle begins |
| Jun 2022 | 1.50–1.75% | 75 bps hike (CPI at 9.1% peak) |
| Jul 2023 | 5.25–5.50% | Peak rate — highest since 2001 |
| Sep 2024 | 4.75–5.00% | First cut (50 bps); easing cycle begins |
| Jan 2026 | 3.50–3.75% | Current rate; held steady after three 25 bps cuts in late 2025 |
Current status (Feb 2026): Headline CPI fell to 2.4% in January 2026 (core 2.5%) — the lowest since May 2025. Shelter (+3.0%) and medical care (+3.2%) remain the stickiest categories. The Fed held rates steady in January; markets are pricing in further cuts if disinflation continues.
Purchasing Power & Protection
Inflation erodes the purchasing power of money over time. A dollar today buys less than a dollar 10 years ago, making it essential to earn at least the rate of inflation on savings.
What $100 From the Past Buys Today
| Year | $100 Then → Today | Total Inflation | Context |
|---|---|---|---|
| 1970 | $815 | +715% | Pre-Great Inflation |
| 1980 | $390 | +290% | Peak inflation era |
| 1990 | $245 | +145% | Post-Volcker stability |
| 2000 | $185 | +85% | Dot-com era |
| 2010 | $146 | +46% | Post-financial crisis |
| 2015 | $134 | +34% | Low inflation period |
| 2020 | $124 | +24% | Pre-COVID |
Approximate values based on CPI-U. Use the BLS Inflation Calculator for precise figures.
Rule of 72: When Prices Double
Divide 72 by the annual inflation rate to estimate how many years until prices double.
| Inflation Rate | Years to Double | Example Period |
|---|---|---|
| 2% | 36 years | Fed target rate |
| 3% | 24 years | Great Moderation average |
| 5% | 14 years | Moderately elevated |
| 7% | ~10 years | Near 2022 levels |
Inflation Protection Strategies
| Strategy | How It Helps | Considerations |
|---|---|---|
| High-Yield Savings | 4–5% APY can match or beat inflation | Rates fall when Fed cuts; short-term solution |
| I Bonds | Inflation-adjusted; currently 4.03% composite | $10k/year limit; 1-year lock-up; 3-month penalty if <5 years |
| TIPS | Treasury bonds with inflation-adjusted principal | Complex tax treatment; better in tax-advantaged accounts |
| Stock Market | Historically ~10% nominal return (~7% real) | Volatile short-term; long-term horizon needed |
| Real Estate | Property values and rents tend to rise with inflation | Illiquid, high entry costs, not guaranteed |
Cash drag: At 3% inflation, $10,000 in a 0.01% checking account loses roughly $2,560 in purchasing power over 10 years. Savings need to earn at least the inflation rate to maintain their real value.
Sources
- 1.Bureau of Labor Statistics — Consumer Price Index (CPI) Data
- 2.Bureau of Labor Statistics — CPI Inflation Calculator
- 3.Federal Reserve — FOMC Statements & Press Releases
- 4.Federal Reserve Bank of Minneapolis — Consumer Price Index, 1913–Present
- 5.U.S. Department of the Treasury — Series I Savings Bonds Interest Rates
- 6.Federal Reserve Bank of St. Louis (FRED) — Federal Funds Effective Rate
This content is for educational and informational purposes only and does not constitute financial, tax, or legal advice. Consult a qualified professional for guidance tailored to your situation.