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.
Year in review
Inflation in 1994
The U.S. inflation rate in 1994 was 2.6% (CPI: 148.2). Convert 1994 dollars to today →
2.6% 1994 inflation rate
3.0% 1990s average
3.0% peak month (Sep)
2.3% lowest month (May)
What things cost in 1994
In 1994, the median household income was $32,264, and a gallon of gas cost $1.11.
| Median household income | $32,264 |
|---|---|
| Gas (per gallon) | $1.11 |
| Median home price | $130,000 |
| First-class stamp | $0.29 |
| Federal minimum wage | $4.25 |
What $100 from 1994 was worth later
$100 from 1994 had the buying power of $224 by 2026; each milestone links to that conversion.
| In 2000 | $116 |
|---|---|
| In 2010 | $147 |
| In 2020 | $175 |
| In 2026 | $224 |
Inflation in 1994, month by month
| Month | CPI-U | 12-month rate |
|---|---|---|
| January | 146.2 | 2.5% |
| February | 146.7 | 2.5% |
| March | 147.2 | 2.5% |
| April | 147.4 | 2.4% |
| May | 147.5 | 2.3% |
| June | 148 | 2.5% |
| July | 148.4 | 2.8% |
| August | 149 | 2.9% |
| September | 149.4 | 3.0% |
| October | 149.5 | 2.6% |
| November | 149.7 | 2.7% |
| December | 149.7 | 2.7% |
Economic events of 1994
NAFTA takes effect on January 1, phasing out tariffs across North America; prices rose 2.6% that year.
- NAFTA takes effect on January 1, phasing out tariffs across North America The trade deal signed the previous December began eliminating tariffs between the U.S., Mexico, and Canada on thousands of goods, the start of a schedule that would remove most remaining barriers over the following decade.
- The Federal Reserve raises interest rates six times, doubling its policy rate Chair Alan Greenspan's Fed lifted the federal funds rate from 3% to 5.5% over the course of the year to head off inflation before it started, a preemptive tightening cycle that caught bond markets off guard and triggered a sharp global bond selloff.
- Orange County, California files for bankruptcy in December The county's investment pool had bet heavily on derivatives tied to interest rates staying low; the Fed's rate hikes turned those bets into an estimated $1.7 billion loss, the largest municipal bankruptcy in U.S. history at the time.
Sources: U.S. Census Bureau, Current Population Survey (income); U.S. Census Bureau, New Residential Sales (home price); U.S. Energy Information Administration (gasoline); U.S. Department of Labor (minimum wage); USPS historical rates.
Inflation figures: U.S. Bureau of Labor Statistics, CPI-U annual averages. See the methodology.