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# U.S. inflation rate in 1986: 1.86%

### Inflation in 1986 and Its Effect on Dollar Value

Purchasing power decreased by 1.86% in 1986 compared to 1985. On average, you would have to spend 1.86% more money in 1986 than in 1985 for the same item.

In other words, \$1 in 1985 is equivalent in purchasing power to about \$1.02 in 1986.

The 1985 inflation rate was 3.56%. The inflation rate in 1986 was 1.86%. The 1986 inflation rate is lower compared to the average inflation rate of 2.61% per year between 1986 and 2019.

Inflation rate is calculated by change in the consumer price index (CPI). The CPI in 1986 was 109.60. It was 107.60 in the previous year, 1985. The difference in CPI between the years is used by the Bureau of Labor Statistics to officially determine inflation.

 Average inflation rate 1.86% Converted amount (\$1 base) \$1.02 Price difference (\$1 base) \$0.02 CPI in 1985 107.600 CPI in 1986 109.600 Inflation in 1985 3.56% Inflation in 1986 1.86%

USD Inflation since 1913
Annual Rate, U.S. Bureau of Labor Statistics CPI

### Inflation by City

Inflation can vary widely by city, even within the United States. Here's how some cities fared in 1985 to 1986 (figures shown are purchasing power equivalents of \$1):

San Diego, California experienced the highest rate of inflation during the 1 years between 1985 and 1986 (7.62%).

Houston, Texas experienced the lowest rate of inflation during the 1 years between 1985 and 1986 (-0.80%).

Note that some locations showing 0% inflation may have not yet reported latest data.

### Inflation by Country

Inflation can also vary widely by country. For comparison, in the UK £1.00 in 1985 would be equivalent to £1.03 in 1986, an absolute change of £0.03 and a cumulative change of 3.40%.

In Canada, CA\$1.00 in 1985 would be equivalent to CA\$1.04 in 1986, an absolute change of CA\$0.04 and a cumulative change of 4.21%.

Compare these numbers to the US's overall absolute change of \$0.02 and total percent change of 1.86%.

### Inflation by Spending Category

CPI is the weighted combination of many categories of spending that are tracked by the government. This chart shows the average rate of inflation for select CPI categories between 1985 and 1986.

Compare these values to the overall average of 1.86% per year:

Category Avg Inflation (%) Total Inflation (%) \$1 in 1985 → 1986
Food 3.20 3.20 1.03
Shelter 5.47 5.47 1.05
Energy -13.11 -13.11 0.87
Apparel 0.85 0.85 1.01
New vehicles 4.27 4.27 1.04
Used cars and trucks -4.31 -4.31 0.96
Transportation services 5.73 5.73 1.06
Medical care services 7.71 7.71 1.08
Medical care commodities 6.58 6.58 1.07

It's important to note that not all categories may be tracked since 1985. This table and visualization use the earliest available data for each category.

### How to Calculate Inflation Rate for \$1, 1985 to 1986

This inflation calculator uses the following inflation rate formula:

CPI in 1986CPI in 1985
×
1985 USD value
=
1986 USD value

Then plug in historical CPI values. The U.S. CPI was 107.6 in the year 1985 and 109.6 in 1986:

109.6107.6
×
\$1
=
\$1.02

\$1 in 1985 has the same "purchasing power" or "buying power" as \$1.02 in 1986.

To get the total inflation rate for the 1 years between 1985 and 1986, we use the following formula:

CPI in 1986 - CPI in 1985CPI in 1985
×
100
=
Cumulative inflation rate (1 years)

Plugging in the values to this equation, we get:

109.6 - 107.6107.6
×
100
=
2%

### Alternate Measurements of Inflation

The above data describe the CPI for all items. Also of note is the Core CPI, which measures inflation for all items except for the more volatile categories of food and energy. Core inflation averaged 4.04% per year between 1985 and 1986 (vs all-CPI inflation of 1.86%), for an inflation total of 4.04%.

When using the core inflation measurement, \$1 in 1985 is equivalent in buying power to \$1.04 in 1986, a difference of \$0.04. Recall that for All Items, the converted amount is \$1.02 with a difference of \$0.02.

In 1985, core inflation was 4.37%.

### Comparison to S&P 500 Index

To help put this inflation into perspective, if we had invested \$1 in the S&P 500 index in 1985, our investment would be nominally worth approximately \$1.66 in 1986. This is a return on investment of 66.07%, with an absolute return of \$0.66.

These numbers are not inflation adjusted, so they are considered nominal. In order to evaluate the real return on our investment, we must calculate the return with inflation taken into account.

The compounding effect of inflation would account for 1.82% of returns (\$0.01) during this period. This means the inflation-adjusted real return of our \$1 investment is \$0.65.

Investment in S&P 500 Index, 1985-1986
Original Amount Final Amount Change
Nominal \$1 \$1.66 66.07%
Real
\$1 \$0.65 64.86%

Politics and news often influence economic performance. Here's what was happening at the time:

• Mikhail Gorbachev replaces Konstantin Chernenko as leader of the Soviet Union.
• Earthquake with a magnitude of 8.1 rocks Mexico City and kills 10,000 people, leaving over 250,000 homeless.
• Mikhail Gorbachev (leader of the Soviet Union) and Ronald Reagan (President of the United States) meet for the first time.
• Ernie Wise makes the first mobile phone call in the UK.

### Data Source & Citation

Raw data for these calculations comes from the Bureau of Labor Statistics' (CPI), established in 1913. Inflation data from 1665 to 1912 is sourced from a historical study conducted by political science professor Robert Sahr at Oregon State University.

You may use the following MLA citation for this page: “Inflation Rate in 1986 | Inflation Calculator.” U.S. Official Inflation Data, Alioth Finance, 24 Oct. 2019, https://www.officialdata.org/inflation-rate-in-1986.