Share:

From the Collaborative Bond and Money Market Data Portal

Disinflation is a slow-down in the rate of inflation. This means that prices are still rising and there is still inflation, but at a slower pace than before, unlike deflation.

Some causes of disinflation could include: 

• Central bank tightening: the raising of interest rates
• Fiscal consolidation: reduced government spending
• Easing of supply shocks: the ending of inflationary circumstances   
• Stronger currency: more comparatively valuable local currency makes imports cheaper

The consequences of disinflation can be both positive or negative, depending on how long it lasts and its level.

• Positive consequences: slows down potentially excessive inflation, and reinstates price stability bringing prices closer to real wages
• Negative consequences: excessive or prolonged disinflation can become deflation, especially if demand is weakened sharply