The Economy & the Fed

Deflation and Disinflation

Two words that sound alike but mean different things. Disinflation is when prices are still rising, just more slowly than before: inflation falling from 5% to 3% is disinflation, and everything still costs more than last year. Deflation is when prices actually fall, so inflation is below zero. Deflation sounds pleasant but is usually a bad sign: people delay purchases waiting for lower prices, businesses earn less, and debts become harder to pay off. Mixing the two up is a classic exam mistake.

Educational information, not investment advice. See it applied across the screener →