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.
Year in review
Inflation in 2009
The U.S. inflation rate in 2009 was -0.4% (CPI: 214.537). Convert 2009 dollars to today →
-0.4% 2009 inflation rate
2.6% 2000s average
2.7% peak month (Dec)
-2.1% lowest month (Jul)
What things cost in 2009
| Median household income | $49,777 |
|---|---|
| Gas (per gallon) | $2.35 |
| Median home price | $216,700 |
| First-class stamp | $0.44 |
| Federal minimum wage | $7.25 |
What $100 from 2009 was worth later
| In 2010 | $102 |
|---|---|
| In 2020 | $121 |
| In 2026 | $154 |
Inflation in 2009, month by month
| Month | CPI-U | 12-month rate |
|---|---|---|
| January | 211.143 | 0.0% |
| February | 212.193 | 0.2% |
| March | 212.709 | -0.4% |
| April | 213.24 | -0.7% |
| May | 213.856 | -1.3% |
| June | 215.693 | -1.4% |
| July | 215.351 | -2.1% |
| August | 215.834 | -1.5% |
| September | 215.969 | -1.3% |
| October | 216.177 | -0.2% |
| November | 216.33 | 1.8% |
| December | 215.949 | 2.7% |
Economic events of 2009
- Consumer prices fall 0.4% for the year, the first annual deflation since 1955 Most of the decline was an energy story: oil had collapsed from $147 a barrel in July 2008 to the low $30s by early 2009, so each month of 2009 was being compared against 2008's price spike. Core inflation (excluding food and energy) stayed positive at around 1.7%, a sign that deflation had not spread across the whole economy.
- The 12-month inflation rate bottoms at −2.1% in July, the deepest since 1950 July 2009 prices were compared against July 2008, the exact month gasoline had peaked above $4 a gallon. As those extreme base months rolled out of the comparison, the rate climbed back above zero by November.
- The Great Recession reaches its bottom in June The downturn had begun in December 2007, when the housing bubble burst and mortgage losses cascaded through the financial system, culminating in the September 2008 failure of Lehman Brothers. It was the deepest recession since the 1930s, erasing roughly 8.7 million jobs. The National Bureau of Economic Research (the official arbiter of U.S. recession dates) later fixed the trough at June 2009, meaning the economy stopped shrinking then, not that times were good: unemployment kept rising for four more months, reaching 10.0% in October.
- Congress passes the $787 billion American Recovery and Reinvestment Act Signed in February 2009, the stimulus package combined tax cuts, infrastructure spending, aid to state budgets, and expanded unemployment benefits. Its purpose was to replace the private demand that had collapsed and, with prices already falling, to keep a temporary deflation from hardening into a 1930s-style spiral.
- The Fed holds rates near zero and launches quantitative easing Having cut its policy rate to 0–0.25% in December 2008, as low as it could go, the Federal Reserve turned to buying mortgage-backed securities and Treasury bonds (about $1.75 trillion in this first round of "QE") to push down long-term borrowing costs. It was the first use of quantitative easing in U.S. history.
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.