US Inflation since 1960

Inflation began the 1960s at a moderate pace, under 1.4 percent. Inflation increased steadily from the mid 1960s passing 2 percent in 1965, 3 percent in 1966 and 5 percent in 1969.

Inflation was held at about 5 percent from 1971 to 1974 due to wage and price controls authorized by the Economic Stabilization Act of 1970. After the Act expired inflation surged, to 8.95 percent in 1974 and 9.25 percent in 1975.

After a brief lull in 1976-77 inflation surged again in the late 1970s breaching 9 percent in 1980 and peaking at 9.7 percent in 1981 in a recession before slowly decreasing in the 1980s, bottoming out at 2.08 percent in 1986 before increasing back to 4 percent in 1989.

In the recession of 1990 inflation began to decline, and since the mid 1990s has fluctuated around 2 percent per year. Until the COVID recovery of 2021 when inflation surged to 4.4 percent.

US Inflation and Deflation from 1860 to 1960

In the 19th century the US monetary system was based on the gold standard, aligning the value of the dollar at a fixed value against the price of gold. Except during wartime.

During the US Civil War in the early 1860s, inflation peaked at 25 percent in 1863. After the war the government returned the dollar to its pre-war value and this forced a severe deflation that peaked in 1867 when prices dropped 8.95 percent in one year.

Deflation slowly moderated -- with fluctuations -- over the next 30 years, finally ending in the mid 1890s, not coincidentally, with the Klondike Gold Rush in Alaska.

Prices increased in the 1900s, peaking at 6.5 percent in 1907, after which inflation was stopped by the Crash of 1907. In World War I, inflation peaked at 22.75 percent in 1917.

But after World War I with a return to the Gold Standard, deflation returned with prices dropping 14.4 percent in 1921. Prices were stable for the rest of the 1920s.

The stock market crash of 1929 started another deflation, with prices declining 9.64 percent in 1931 and 10.23 percent in 1932. But that was the end of deflation in the United States.

Inflation returned to the US during World War II, peaking at 7.95 percent in 1942. But after the war, the US did not return to the Gold Standard, but instead implemented a “Gold Exchange Standard” under which individual Americans could not exchange paper money for gold. So inflation continued, with 11.38 percent in 1946 and 10.86 percent in 1947. There was a brief pulse with 7.95 percent inflation in 1951 during the Korean War. Thereafter inflation slowly subsided in the 1950s.

Recent OMB Inflation Forecasts

Chart I.05: OMB Inflation Forecasts

Every year in the federal budget the Office of Management and Budget publishes "Table 10.1 - Gross Domestic Product and Deflators Used in the Historical Tables" that projects GDP and inflation out five years. In the FY25 budget Table 10.1 (xlsx) provides estimates of GDP and inflation out through FY 2029.

Chart I.05 shows the OMB inflation forecasts for the FY2022, FY2023, FY2024, and FY2025 budgets. The actual historical inflation is shown in yellow. No increase in inflation was forecast until the FY2023 federal budget, and that inflation was expected to be “transitory.”