Value of $100 in 1989, adjusted to 2017

What happened to prices between 1989 and 2017

Between 1989 and 2017, the Consumer Price Index went from 124 to 245.12. Cumulatively, prices increased 97.7%, which works out to an average of 2.46% per year. Put differently, a dollar in 1989 bought what $0.51 buys in 2017: the 1989 dollar lost 49.4% of its purchasing power over these 28 years.

1989 closed out a decade that began in economic crisis and ended in a long, calmer expansion. Inflation for the year came in at 4.8%, higher than the mid-decade lull but still roughly a third of the 13.5% peak that had opened the decade in 1980. The federal minimum wage, unchanged at $3.35 an hour since January 1981, had gone longer without an increase than at any point since Congress created it, and had lost close to a third of its purchasing power to inflation in the meantime; lawmakers would finally raise it to $3.80 the following April. The decade’s other unfinished business came due in August, when Congress passed FIRREA, the law that created the Resolution Trust Corporation to seize and sell off the hundreds of savings and loan institutions that a decade of deregulation and risky lending had left insolvent, a bailout that eventually cost taxpayers over $100 billion. On Wall Street, the recovery was already complete: the Dow Jones Industrial Average closed 1989 at a record high, just over two years after Black Monday’s 22.6% single-day crash, capping the bull market that had begun at the Dow’s 776 low in August 1982. Between the S&L bailout, a wage floor eroded by years without a raise, and a stock market at new highs, 1989 captured how unevenly the decade’s disinflation had been felt.

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The destination year: 2017

In 2017, prices rose 2.1% and $100 from 1989 had the buying power of $198; 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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