What it is
Disinflation is when the prices of goods and services are increasing, but not as much as they did before. It is the decline in the rate of inflation.
This is different from deflation, which occurs when prices are falling. Like inflation and deflation, disinflation can help indicate the health of an economy.
What it means for you
As a consumer, disinflation can be beneficial since the money you’ll spend on goods and services won’t increase by a lot. When the cost of living is manageable, it’s relatively easier to save or invest money.
For an economy, cooling inflation can be viewed as a good or a bad sign depending on what’s causing it and whether it aligns with that country’s growth targets.
On one hand, disinflation can keep an economy from overheating. This is when growth becomes unsustainable because supply can’t keep up with demand and so prices skyrocket.
A prolonged decline in the inflation rate can be a cause for concern if the downward trend leads to deflation and signals a weakening economy.
Changes in economic activity can influence investment performance and so investors monitor these trends.
