disinflation
A slowing in the rate of price inflation — prices are still rising but at a decreasing rate — distinct from deflation where prices actually fall.
Example
“Disinflation from 9% to 4% was welcome but the Fed continued raising rates to reach its 2% target.”
Memory Tip
DISINFLATION = inflation SLOWING DOWN. Prices still rising, just slower. Not deflation.
Why It Matters
Disinflation affects your purchasing power and investment returns differently than deflation does. Understanding whether prices are rising slower versus actually falling helps you make better decisions about saving, spending, and whether to hold cash or invest in bonds and stocks.
Common Misconception
Many people confuse disinflation with deflation and think they mean the same thing. The key difference is that disinflation still means prices go up, just more slowly, while deflation means prices actually decrease, which is much rarer and more economically damaging.
In Practice
Imagine inflation was 8 percent last year but slows to 4 percent this year. That is disinflation in action. Your groceries still cost more than before, but the rate at which they are becoming more expensive has dropped. However, if inflation had gone from 8 percent to negative 2 percent, that would be deflation where prices actually fall.
Etymology
DIS- (reduction) + INFLATION. A reduction in the RATE of INFLATION.
Common Misspellings
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