US Inflation Rate History by Year 1929 to 2025

The U.S. inflation rate measures how much prices for everyday goods and services have risen over the previous 12 months, and it stood at 2.7% in November 2025. That single number shapes mortgage rates, grocery bills, and how the Federal Reserve sets policy for the entire economy.

In Brief

• The inflation rate tracks the year over year change in prices, most commonly through the Consumer Price Index.
• November 2025 inflation came in at 2.7%, above the Federal Reserve's long standing 2% target.
• Inflation hit 9.1% in June 2022, the highest reading since 1981, before cooling through 2023 and 2024.
• The Fed raises or lowers the federal funds rate largely in response to where inflation sits relative to its goal.
• Deflation, the opposite problem, carries its own risks including falling business activity and rising unemployment.

What the Inflation Rate Actually Measures

Inflation is the percentage change in prices for goods and services over a year's time. The Bureau of Labor Statistics calculates the most widely cited version through the Consumer Price Index, or CPI, which tracks what American households pay for a broad basket of items each month. The Bureau of Economic Analysis produces a second measure, the personal consumption expenditures price index, which the Fed also watches closely.

To get the yearly figure, analysts take the CPI value at the end of a period, subtract the CPI value from 12 months earlier, divide by that earlier value, and multiply by 100. The result is the percentage most people mean when they ask how fast prices are climbing.

As of November 2025, that number sat at 2.7% on an unadjusted, year over year basis. That is a modest reading by recent standards. It sits close to, though still above, the 2% target the Federal Reserve treats as the mark of a healthy, stable economy.

Why Central Banks Fixate on This Number

Governments, economists, and central bankers watch the inflation rate because it signals whether an economy is running too hot, too cold, or about right. The Fed treats 2% as the sweet spot: low enough to avoid squeezing household budgets, high enough to avoid the dangers of deflation.

Deflation is inflation's mirror image. It happens when consumers delay purchases, betting prices will keep falling, which then drags down business activity and can push unemployment higher. Sustained deflation can do lasting damage to an economy, which is one reason the Fed does not aim for 0% inflation.

Runaway inflation carries its own dangers. When prices climb faster than wages, households lose purchasing power even if their paychecks stay the same size. That is why most central banks try to hold inflation in a narrow band, generally 2% to 3%, rather than letting it drift too far in either direction.

A Century of Price Swings

Inflation in the United States has been comparatively tame since the 1980s, but the historical record shows just how volatile it can get. The table below draws on Bureau of Labor Statistics data alongside the federal funds rate, the phase of the business cycle, and major events tied to each period.

The Great Depression years produced repeated bouts of outright deflation, with prices falling more than 10% in 1932 alone. The 1970s and early 1980s told a different story: double digit inflation driven by oil shocks, the end of the gold standard, and stagflation, prompting the Fed to push the federal funds rate as high as 18% in 1980 under Paul Volcker's leadership. More recently, inflation spiked to 9.1% in June 2022, its worst showing since 1981, as pandemic era supply disruptions and stimulus spending collided. It has since eased, falling to 3.4% by the end of 2023 and 2.9% by the end of 2024.

How Expansions, Peaks, and Contractions Push Prices Around

Inflation rarely moves in a straight line because it is tied to the business cycle, the recurring pattern of growth and pullback that economies go through. That cycle has four stages: expansion, peak, contraction, and trough.

During expansion, output, employment, and demand typically climb together, and inflation tends to hover near that comfortable 2% mark. Once the economy reaches its peak, growth maxes out, prices often reach their highest point, and the Fed usually responds by raising rates to cool things down. That tightening frequently tips the economy into contraction, when prices soften, hiring slows, and growth turns negative. If a contraction runs long enough, it can become a recession and, in severe cases, tip into deflation. Eventually the economy hits a trough, its low point, before prices start climbing again and a new expansion begins.

The Fed's Toolkit for Keeping Prices in Check

The Federal Reserve leans on monetary policy to manage inflation as the business cycle turns. Rather than watching headline CPI alone, the Fed pays close attention to core inflation, which strips out food and energy prices because those categories swing too sharply to reflect underlying trends.

When core inflation runs well above the 2% target, the Fed typically raises the federal funds rate, the rate banks charge each other for overnight loans. A higher federal funds rate ripples outward, pushing up borrowing costs for mortgages, credit cards, and business loans, which in turn slows spending and cools price growth. When the economy needs a lift instead, the Fed can lower the discount rate, the rate it charges banks directly, encouraging those banks to lower their own lending rates and making it cheaper for households and businesses to borrow.

Beyond interest rates, the Fed has other levers available when it wants to stimulate growth, including buying government securities, cutting the reserve requirement for banks, and conducting open market operations, in which it buys or sells Treasury securities to influence the money supply. With inflation at 2.7% in November 2025, still running above the Fed's target but well off its 2022 peak, the coming months will likely hinge on whether policymakers see enough progress to ease rates further or decide the last stretch back to 2% demands more patience.