Disinflation
Disinflation is a reduction in the rate of inflation. Prices continue increasing but at a slower pace. For example, inflation falling from 6% to 3% is disinflation. It differs from deflation, where prices actually fall.
Real World
The Bank of England raised interest rates from 0.1% to 5.25% between December 2021 and August 2023, successfully achieving disinflation as CPI fell from 11.1% to around 4% without triggering a deep recession.
Exam Focus
Emphasise that disinflation means prices are still rising — just more slowly — and explain why this is usually a positive policy outcome.
How well did you know this?