Value of $100 in 1988, adjusted to 2017

What happened to prices between 1988 and 2017

Between 1988 and 2017, the Consumer Price Index went from 118.3 to 245.12. Cumulatively, prices increased 107.2%, which works out to an average of 2.54% per year. Put differently, a dollar in 1988 bought what $0.48 buys in 2017: the 1988 dollar lost 51.7% of its purchasing power over these 29 years.

By 1988, the economic expansion that began in the ashes of the 1981-82 recession was in its sixth year, and the Federal Reserve was watching for signs it had run too long. Inflation rose to 4.1%, up from 3.6% the year before, while unemployment fell to its lowest level since 1974. Alan Greenspan’s Fed responded by raising the federal funds rate through the year, from about 6.5% to 8.5%, trying to cool demand before prices accelerated the way they had in the 1970s. Households still felt the difference between this expansion and the last one: gas held near 90 cents a gallon, almost exactly its 1987 price, and median household income rose to roughly $27,200. The one price that moved was postage, which rose from 22 to 25 cents in April, the fourth increase of the decade but a far gentler pace than the string of increases in the late 1970s and early 1980s. In November, Vice President George H.W. Bush won the presidency on the strength of the expansion, promising in his nomination speech to hold the line on taxes. Both the boom and that pledge would run into trouble within two years, as the Fed’s rate increases helped tip the economy toward the 1990-91 recession.

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The destination year: 2017

In 2017, prices rose 2.1% and $100 from 1988 had the buying power of $207; the year's average CPI of 245.12 is the level behind every 2017 figure on this page.

2017 pushed consumer prices back above the Federal Reserve’s 2% target. The CPI rose 2.1%, the first reading over 2% in five years, helped by a rebound in energy after OPEC’s output cuts and by a storm-related spike at the pump: Hurricane Harvey shut a large part of Gulf Coast refining in late August. Gasoline averaged $2.42 a gallon, up from $2.14 in 2016.

Household incomes kept rising. The median household income reached $61,372, and the median new home sold for about $322,100. The federal minimum wage stayed at $7.25, its eighth year at that level, and a first-class stamp rose to 49 cents.

The Fed raised rates three times, to 1.25–1.50%, and in October began letting its bond holdings shrink. Congress passed the Tax Cuts and Jobs Act in December, lowering the corporate rate to 21%. Even with unemployment near 4%, core inflation stayed under 2%, a puzzle that shaped Fed debates for the next two years.

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