U.S. Inflation Rate by Year: Historical Data and 2026 Trends

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Current Values

The U.S. inflation rate by year shows how much the prices consumers pay rose or fell over each 12-month period. The figure most people quote is the year-over-year change in the Consumer Price Index for All Urban Consumers (CPI-U), published monthly by the Bureau of Labor Statistics (BLS). Annual figures run December to December, while monthly figures compare each month with the same month a year earlier, and the two can tell different stories about the same year.

The recent trend fits in a few rows. Inflation measured December to December reached 7.2% in 2021 and 6.4% in 2022, the fastest pace in four decades. It then eased each year: 3.3% in 2023, 2.9% in 2024 and 2.6% in 2025. None of those years returned to the Federal Reserve’s 2% goal. The 2026 row is a partial-year reading, not a December figure. It sits above the 2025 result, so the slowdown that began in 2023 has not continued into 2026 so far.

How the Inflation Rate Is Calculated

A price index tracks the cost of a fixed basket of goods and services relative to a base period. For the CPI the base period is 1982 to 1984 = 100. The inflation rate is the percentage change in that index:

Inflation rate = (CPI now − CPI 12 months earlier) ÷ CPI 12 months earlier × 100

Hypothetical example: if the index stands at 320.0 this month and stood at 310.0 a year earlier, the inflation rate is (320.0 − 310.0) ÷ 310.0 × 100 = 3.2%. The index level itself says nothing about whether prices are high or low today. Only the change between two dates carries meaning.

The same formula works over any interval. Replace “12 months earlier” with the start date you care about to get cumulative inflation between two years. For example, divide a 2026 index value by a 2000 index value, subtract 1, and the result is the total rise in consumer prices over that span.

How to Read the Table and Chart

The same CPI-U series can be read in three forms, and each answers a different question.

The chart (monthly year-over-year change). Each point compares one month’s index with the same month a year earlier, so turning points show up as they happen.

The table (December to December). Each annual row compares December’s index with the prior December. This is the conventional “inflation for the year” figure. It captures where prices ended up, not the path they took.

The Current Values panel. The latest 12-month reading, the previous month’s reading and a 10-year average give a quick sense of direction.

A December-to-December figure can hide large moves within a year. In 2008 the table shows essentially zero inflation (listed as −0.0%), yet consumer prices were rising faster than 5% year over year in mid-2008 before energy prices collapsed during the financial crisis. The calendar-year average of monthly index values, a third measure, gives a much higher figure for 2008. When comparing years, use the same measure throughout.

The 2026 row

The 2026 row shows the latest available 12-month change, not a completed December-to-December result. It will be replaced when December data is published. Until then, set it against earlier rows as an indication of direction, not as a finished annual figure.

The other columns

Fed funds (avg) is the average federal funds rate over the year. Averaging blurs the timing of policy changes. In 2022 the Fed raised rates from near zero to above 4%, but the yearly average shows 1.68% because most of the increases came late in the year. Pairing that average with 6.4% inflation understates how restrictive policy was by December.

Business cycle labels a year a contraction when real GDP growth was below zero. That simple annual rule differs from official recession dating by the National Bureau of Economic Research (NBER), which identifies peaks and troughs by month. The NBER dates the Great Recession from December 2007 to June 2009, while the table labels 2008 an expansion and 2009 a contraction based on full-year GDP growth.

President shows who held office for most of the year. Inflation responds to policy with long lags and to forces no administration controls, such as oil shocks and pandemics.

CPI, Core Inflation and PCE: Which Rate Is Which

“The inflation rate” can refer to several different indexes:

• CPI-U covers urban consumers, roughly 90% or more of the U.S. population. It is the headline figure in the monthly BLS release.
• CPI-W covers urban wage earners and clerical workers. The Social Security cost-of-living adjustment (COLA) is based on it.
• Chained CPI-U (C-CPI-U) accounts for consumers switching between items as relative prices change. Since the Tax Cuts and Jobs Act of 2017 it has been used to index federal income tax brackets. It typically rises a little more slowly than CPI-U.
• Core CPI excludes food and energy, whose prices swing widely, to show the underlying trend.
• PCE price index, produced by the Bureau of Economic Analysis (BEA), measures prices of goods and services consumed by households. That includes items paid for on households’ behalf, such as employer-provided health insurance. Its weights shift more readily as spending patterns change. The Fed’s 2% longer-run goal is stated in terms of PCE inflation, and policymakers watch core PCE closely.

Because the CPI gives more weight to housing and the PCE gives more weight to health care, the two can diverge, and CPI readings tend to run somewhat higher. Shelter is the largest single component of the CPI and is measured mainly through rents and owners’ equivalent rent. Rents adjust slowly as leases renew, so shelter inflation tends to lag market rents by months.

A Century of U.S. Inflation

The CPI series begins in 1913, and the history falls into distinct periods.

World War I and the 1920s

Prices rose rapidly during and after World War I. The 12-month change peaked at 23.7% in June 1920, the highest CPI inflation reading on record. A sharp postwar slump followed, with falling prices in 1921, before a mostly stable decade.

The Great Depression

After the 1929 market crash, prices fell three years in a row: 6.4% in 1930, 9.3% in 1931 and 10.3% in 1932, measured December to December. Output contracted severely over the same period. Deflation of this kind raised the real burden of debts, as borrowers repaid loans with dollars worth more than the ones they borrowed. Prices began to rise again after 1933, but a renewed slump brought another decline of 2.8% in 1938.

World War II and its aftermath

Defense spending pushed inflation to 9.9% in 1941 and 9.0% in 1942. Wartime price controls then held it near 2% to 3%. When controls were lifted after the war, pent-up demand met limited supply, and inflation reached 18.1% in 1946 and 8.8% in 1947. Prices fell again in 1949 before the Korean War briefly lifted inflation to about 6% in 1950 and 1951.

The 1950s and early 1960s

From the mid-1950s to the mid-1960s annual inflation mostly stayed between roughly 1% and 3%. This was one of the calmest stretches in the record.

The Great Inflation, 1965 to 1982

Spending on the Vietnam War and new social programs, combined with accommodative monetary policy, pushed inflation steadily higher after 1965. In 1971 the U.S. suspended dollar convertibility into gold, ending the Bretton Woods system, and imposed temporary wage and price controls. The 1973 oil embargo and the 1979 Iranian Revolution then sent energy prices soaring. December-to-December inflation reached 12.3% in 1974, 13.3% in 1979 and 12.5% in 1980. Rising prices also fed expectations of further increases, which shaped wage demands and pricing decisions.

Paul Volcker became Fed chair in 1979 and tightened policy hard. The federal funds rate approached 20% in 1981, and the economy went through back-to-back recessions in 1980 and 1981 to 1982. Inflation fell below 4% by 1982, at the cost of unemployment that topped 10%.

The Great Moderation and after, 1983 to 2020

For nearly four decades inflation stayed mostly in the 1% to 4% range. Spikes were brief and usually tied to energy prices, as in 2008. After the 2008 financial crisis inflation often ran below 2%, at 0.7% in 2014 and 0.6% in 2015, even with the federal funds rate near zero. In 2012 the Fed formally adopted 2% as its longer-run inflation goal, and in 2020 it said it would aim for inflation that averages 2% over time.

The pandemic surge, 2021 and 2022

Inflation was 1.3% in 2020 as the pandemic hit demand. The surge that followed had several causes: reopening demand, large fiscal support, supply chain bottlenecks, shifts in spending toward goods and higher energy prices after Russia’s invasion of Ukraine in 2022. The 12-month CPI change peaked at 9.1% in June 2022, the highest since 1981. The Fed began raising rates in March 2022 and lifted its target range to 5.25% to 5.50% by mid-2023.

2023 to 2026: slower, but not back to target

The Fed started cutting rates in September 2024 as inflation eased. The last stretch toward 2% has proved the hardest part of the decline, partly because services and shelter prices tend to adjust more slowly than goods prices.

What Drives Inflation

• Demand-pull pressure. When households, businesses and government try to buy more than the economy can produce, sellers raise prices. Strong job markets, easy credit and deficit spending add to demand.
• Cost-push pressure. Higher costs for energy, raw materials, shipping or labor get passed on to consumers. Supply shocks such as oil embargoes, wars and pandemic disruptions belong here.
• Money and credit. Over long periods, sustained high inflation has gone along with rapid growth in money and lending.
• Expectations. If businesses and workers expect prices to keep rising, they build that into wages and prices, which is why central banks work to keep long-run expectations anchored.
• Exchange rates and trade. A weaker dollar raises the dollar cost of imports. Tariffs raise the cost of affected goods, at least initially.
• Productivity. Faster productivity growth lets output expand without as much pressure on prices.

Falling prices usually trace to the reverse: collapsing demand, as in the Depression and briefly in 2009, or sharp drops in commodity prices.

Business Cycles: Expansion and Contraction

Inflation tends to move with the business cycle, which runs through expansion, peak, contraction and trough.

Expansions and Peaks

During an expansion, employment, output and spending generally rise. Early on, unused capacity lets the economy grow without much price pressure. As slack disappears, inflation tends to rise, and it is often elevated near peaks, frequently when the Fed has been tightening. The link is not mechanical: 2021 combined expansion and a supply shock, while much of the 2010s combined expansion with inflation below 2%.

Contractions and Troughs

In a contraction, output and employment fall. Inflation usually slows, and a deep or long contraction can turn into deflation, as in the early 1930s. The 2009 and 2020 rows show inflation slowing during contraction years. The exception was 1970s stagflation, when supply shocks kept inflation high while growth stalled and unemployment rose.

How the Federal Reserve Responds

The Fed has a dual mandate from Congress: maximum employment and stable prices. Its main tool is the target range for the federal funds rate, the overnight rate banks charge each other.

When inflation is too high, the Fed raises that target. Higher short-term rates spread to mortgages, auto loans, credit cards and corporate borrowing, slowing spending and easing price pressure. When the economy is weak and inflation is low, it cuts rates. Other tools include interest on bank reserves, large-scale asset purchases (quantitative easing), balance-sheet runoff (quantitative tightening) and guidance about future policy.

Policy works with a lag that is often estimated at a year or more. That helps explain why inflation can keep rising after the Fed begins tightening, and why the table’s fed funds column often looks out of step with the same year’s inflation.

What Is a Healthy Inflation Rate?

The Fed considers 2% inflation, measured by the PCE price index over the longer run, consistent with stable prices, and many other central banks use similar targets. A low, predictable rate lets households and businesses plan, leaves a buffer against deflation and gives the central bank room to cut rates in a downturn.

Deflation is a risk in its own right: when people expect prices to keep falling they delay purchases, and spending, business revenue and employment can decline together. Inflation that is too high erodes purchasing power, can outpace wages and tends to fall hardest on people with fixed incomes and little savings.

Average and Cumulative Inflation Over a Period

Averaging annual inflation rates by adding them up and dividing by the number of years gives an approximation, not the true change in purchasing power. Prices compound, so cumulative inflation over a period is:

Cumulative inflation = (1 + r₁) × (1 + r₂) × … × (1 + rₙ) − 1

The compound annual rate over the same period is:

Average annual rate = (CPI end ÷ CPI start)^(1 ÷ n) − 1, where n is the number of years.

Hypothetical example: three years of inflation at 7%, 6% and 3% compound to 1.07 × 1.06 × 1.03 − 1 = 16.8%. That is a little more than the 16% you get by adding the rates. The compound annual average works out to about 5.3%. A basket that cost $1,000 at the start would cost about $1,168 at the end, and $1,000 of cash would buy roughly 14% less.

The period you pick changes the answer a great deal. A span that includes the 1970s will show a much higher average than one covering 2000 to 2020, so read any average inflation rate next to its start and end dates.

What Inflation Means for Savings, Wages and Benefits

A real return or raise is the nominal figure adjusted for inflation:

Real rate ≈ nominal rate − inflation rate, or exactly (1 + nominal) ÷ (1 + inflation) − 1.

Hypothetical example: a savings account paying 4% while inflation runs at 3% earns a real return of about 1%. The same account paying 0.5% loses about 2.5% of purchasing power per year. The same test applies to high-yield savings accounts and CD rates. Interest is usually taxable, so the after-tax real return is lower.

Wages work the same way: a 3% raise in a year of 4% inflation is a cut in real pay. Inflation also adjusts several government amounts. Social Security’s annual COLA is based on the change in CPI-W from the third quarter of one year to the third quarter of the next. Federal tax brackets and many deduction limits are indexed to chained CPI. Treasury Inflation-Protected Securities (TIPS) adjust their principal with CPI-U, and Series I savings bonds combine a fixed rate with an inflation-linked rate.

Limits of the Data

• Your inflation rate differs from the average. The CPI reflects an average urban consumer’s spending. A renter in a fast-rising housing market, a retiree with heavy medical costs or a long-distance commuter faces a different mix of price changes.
• Quality and new products. The BLS adjusts for quality changes and adds new items over time. How well these adjustments capture real changes in living standards is a long-running debate.
• Substitution. Standard CPI-U assumes a relatively fixed basket and can overstate the cost-of-living increase when consumers switch to cheaper alternatives. Chained CPI and PCE address this in part.
• Seasonal adjustment and base effects. The headline 12-month figure is usually not seasonally adjusted. A big price jump or drop a year earlier can make the current 12-month rate move sharply even when month-to-month inflation is steady.
• Revisions. Unadjusted CPI-U figures are generally not revised after publication, but seasonally adjusted figures are recalculated each year and PCE data is revised as source data improves. Older readings of these measures can change.
• Early history. Pre-war CPI data rests on narrower price samples and methods different from today’s. Comparisons across a century are approximate.

Historical Data

All10Y

2026 shows the latest 12-month change. Business cycle: real GDP growth below zero = contraction.

FAQs

The Bottom Line

Savers, workers and retirees can use these figures to check whether interest, raises and benefits keep pace with prices. A return or raise below the inflation rate is a loss in real terms, and taxes on interest shrink the real return further. When comparing years or averages, stick to one measure and note the start and end dates, since the period chosen changes the result a great deal.