Value of $100 in 1997, adjusted to 2009

What happened to prices between 1997 and 2009

Between 1997 and 2009, the Consumer Price Index went from 160.5 to 214.537. Cumulatively, prices increased 33.7%, which works out to an average of 2.45% per year. Put differently, a dollar in 1997 bought what $0.75 buys in 2009.

The destination year: 2009

2009 is the rarest kind of year in the modern price data: one where the cost of living went down. The CPI fell 0.4%, the first full-year deflation since 1955, as the Great Recession hollowed out demand and oil unwound from its $147 spike the summer before. Gasoline that had cost over $4 a gallon in July 2008 averaged $2.35 in 2009, and that energy collapse dragged the 12-month inflation rate to −2.1% by July, the deepest reading since 1950. Policymakers treated falling prices not as relief but as a warning: deflation raises the real weight of debt precisely when households are drowning in it, which is why the Federal Reserve pinned interest rates near zero, began buying bonds by the hundreds of billions, and Washington passed a $787 billion stimulus. The medicine took: prices stabilized within a year, and 2009 remains the textbook case of why central banks fear deflation more than moderate inflation.

More about inflation in 2009 →