Disinflation
From FXPedia
When economists measure growth within an economy, they often discuss it in terms of inflation; there are three states of inflation that are commonly-used to describe the economy: inflation, deflation, and disinflation. The level of inflation is expressed as a percentage of change from one reporting period to the next.
Inflation occurs in an economy when there is any amount of positive economic growth — deflation, as its name implies, is the opposite of inflation and occurs when economic growth is negative. The Consumer Price Index (CPI) is typically used to measure economic growth as it is a consumer-level analysis of the cost to buy a defined basket of goods and services. This makes it possible to compare two or more periods to assess the degree of growth within the economy.
By definition, an increase in economic growth means that the economy is in a state of inflation, and many central banks including the Bank of Canada and the Bank of England consider 2% inflation to be an acceptable level of growth that can be sustained by the economy. Growth above this threshold threatens to erode consumer buying power.
When using the term disinflation, economists are referring to a slowdown in the rate of inflation between two periods but growth is still positive. For example, if England had a yearly rare of inflation of 3 percent one year, followed by an increase of 2 percent the next year, this would be considered disinflation as inflation was still present in the economy, but the rate of inflation was trending downwards.
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