Disinflation
Disinflation is a reduction in the rate of inflation. When that rate remains positive, the general price level continues to increase, but more slowly. It may follow reduced demand pressure, improved supply conditions or other changes. Describing the rate clearly prevents confusion between prices rising less quickly and prices actually falling.
Worked example
An index rises from 100 to 108 in one year and then to 112.32 in the next. Annual inflation falls from 8% to 4%, but the price level is higher in both years.
Common mistake
Do not say that a fall in annual inflation from 8% to 4% cuts the price level by 4%. It reduces the rate of increase.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | BT | Supporting | September 2026–June 2027 |
| FIA | FBT | Supporting | September 2026–June 2027 |