Disinflation

Disinflation refers to a slowdown in the rate of inflation, meaning that prices are still rising but at a slower pace than before. It is a sign of cooling inflationary pressures in an economy but is not the same as deflation, where prices actually fall. Disinflation often occurs when central banks tighten monetary policy to control inflation by raising interest rates or reducing the money supply. Disinflation is generally seen as positive for an economy, as it indicates that inflation is being managed without causing prices to drop, which can lead to economic stagnation.

Example

If inflation drops from 5% to 3%, this is considered disinflation, as prices are still increasing, but at a slower rate.