Disinflation
A slowing in the rate of inflation, while prices continue to rise.
Formula
Test: the inflation rate falls between periods while remaining above zero
Unit
%
In depth
Disinflation and deflation are constantly confused, and the difference is fundamental: under disinflation prices are still rising, just more slowly, while under deflation they are actually falling. Disinflation is normally the desired outcome of tighter monetary policy, and it is what a central bank means by getting inflation under control. Bond markets like it because it raises the prospect of rate cuts; equity markets like it for the same reason, provided it does not come with a recession. Headlines describing disinflation as prices coming down are describing something that is not happening.
Worked example
Inflation falls from 7.1% to 4.6% over a year. Prices are 4.6% higher than a year ago, not lower — an item at ₹100 two years ago now costs 100 x 1.071 x 1.046 = ₹112.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Disinflation” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.