Why was inflation so high in 1980?

Inflation was high in 1980 due to a combination of factors, including an increase in oil prices, expansionary monetary policy, and rising labor costs. In the 1970s, there were significant increases in oil prices, which led to higher costs for transportation and production of goods. The expansionary monetary policy pursued by the US Federal Reserve also contributed to inflation, as it increased the money supply and lowered interest rates, leading to higher spending and demand. Additionally, labor costs rose due to strong wage demands from unions and a tight labor market. These factors combined to create high inflation in 1980, which peaked at around 14%.

The effects of inflation are often not directly felt but are played out over a long time, especially long-term investments are vulnerable to inflation.


At Horizon65, we created a mobile app that enabled you to check the effect of inflation on your savings.

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