Disinflation
A slowdown in the rate of inflation — prices still rising, but more slowly.
What is Disinflation?
Disinflation refers to a reduction in the rate of inflation — prices are still increasing, but at a slower pace than before. It is not the same as deflation (where price levels fall) or disinflation's near-synonym 'decelerating inflation'. Disinflation is typically the desired outcome when a central bank raises interest rates to combat high inflation: the goal is to slow price growth back toward target without causing prices to actually fall or triggering a recession. Investors, bond markets, and central bankers closely watch disinflation trends to gauge whether monetary policy is working as intended.
Example
After the US CPI peaked at 9.1% in June 2022, the Federal Reserve's aggressive rate hikes contributed to a sustained disinflation: CPI fell to 3.7% by September 2023 and continued declining toward the 2% target. Prices were still rising, just much more slowly — a textbook disinflation episode.