Value of $100 in 1954, adjusted to 2021

What happened to prices between 1954 and 2021

Between 1954 and 2021, the Consumer Price Index went from 26.9 to 270.97. Cumulatively, prices increased 907.3%, which works out to an average of 3.51% per year. Put differently, a dollar in 1954 bought what $0.10 buys in 2021.

Consumer prices rose 0.7% in 1954, extending 1953’s 0.8% slowdown even as the economy tipped into recession, an early example of prices continuing to rise through a downturn rather than falling with it. The National Bureau of Economic Research dates that recession from July 1953 to May 1954, as defense spending fell after the Korean War armistice and the tighter monetary policy of the year before worked its way through the economy. The Supreme Court reshaped a different part of American life that spring: its unanimous May 17 ruling in Brown v. Board of Education held that “separate but equal” public schools violated the Constitution, overturning the legal basis for segregated education. Washington also closed the book on a different fight that year. Following the televised Army-McCarthy hearings that spring, the Senate voted 67 to 22 on December 2 to condemn Senator Joseph McCarthy’s conduct, ending his dominance of American politics after four years of anti-communist investigations. Consumer prices finished 1954 171.7% above their 1913 level, essentially flat with 1953 as the mild recession held the cost of living in check. First-class postage held at 3 cents, and the minimum wage stayed at 75 cents an hour.

More about inflation in 1954 →

The destination year: 2021

2021 was the year inflation stopped being background noise. Consumer prices rose 4.7% on average for the year, and the pace kept building as the months went on: by December, the 12-month rate had reached 7.0%, the highest since 1982. The proximate cause was a supply chain that could not keep up with a fast-reopening economy. A global semiconductor shortage choked new car production and pushed used vehicle prices up by more than a third, the single largest line item in the year’s inflation math. Lumber, appliances, and shipping capacity told versions of the same story: demand snapped back faster than factories, ports, and truckers could handle it. Washington added fuel in March with the $1.9 trillion American Rescue Plan, on top of the relief already in the pipeline since 2020. For most of the year, the Federal Reserve called the price surge “transitory,” a temporary reopening effect expected to fade on its own, and held its policy rate near zero. By November, with inflation still climbing, the Fed reversed course and began winding down its bond purchases, the first step toward the rate hikes that would follow in 2022. Gas averaged $3.01 a gallon for the year, up from about $2.17 in 2020, while the federal minimum wage held at $7.25, unchanged since 2009. In hindsight, 2021 reads as the hinge year: the point where “transitory” inflation became the multi-year fight the Fed spent the next two years trying to win.

More about inflation in 2021 →