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Disinflation is a decrease in the rate ofinflation – a slowdown in the rate of increase of the generalprice level of goods and services in a nation'sgross domestic product over time. It is the opposite ofreflation.
If theinflation rate is not very high to start with, disinflation can lead todeflation – decreases in the generalprice level of goods and services. For example if the annual inflation rate one month is 5% and it is 4% the following month, prices disinflated by 1% but are still increasing at a 4% annual rate. If the current rate is 1% and it is the -2% the following month, prices disinflated by 3% and are decreasing at a 2% annual rate.
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