Value of $100 in 1994, adjusted to 2017

What happened to prices between 1994 and 2017

Between 1994 and 2017, the Consumer Price Index went from 148.2 to 245.12. Cumulatively, prices increased 65.4%, which works out to an average of 2.21% per year. Put differently, a dollar in 1994 bought what $0.60 buys in 2017: the 1994 dollar lost 39.5% of its purchasing power over these 23 years.

Gas averaged $1.11 a gallon in 1994, a new home cost roughly $130,000, and the median household earned about $32,300. Inflation ran at 2.6% for the year, the calmest reading since the mid-1980s, even as the Federal Reserve spent the year raising interest rates precisely to keep it that way. Chair Alan Greenspan’s Fed lifted the federal funds rate from 3% to 5.5% over six moves, a preemptive tightening campaign meant to head off inflation before it built rather than react to it after the fact. The bond market, unprepared for such a rapid climb, sold off sharply, and the higher rates rippled into places few had expected: Orange County, California, whose investment pool had bet heavily on rates staying low, filed for bankruptcy in December after losing an estimated $1.7 billion, the largest municipal bankruptcy in the country’s history at the time. On the trade front, NAFTA took effect January 1, phasing out tariffs on thousands of goods moving between the U.S., Mexico, and Canada, the start of a schedule that would eliminate most remaining barriers over the following decade. It was a year that showed inflation control could have its own costs, paid out in the bond market and, in Orange County’s case, a bankruptcy court.

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The destination year: 2017

In 2017, prices rose 2.1% and $100 from 1994 had the buying power of $165; 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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