HomeFinance NewsPersonal financeDeflation or Disinflation: Which Economic Phenomenon Will Hit Your Wallet?

Deflation or Disinflation: Which Economic Phenomenon Will Hit Your Wallet?


Deflation vs. disinflation: One is ‘the more ideal outcome,’ economist says


The inflation rate in the U.S. has gradually declined from its peak reached in June 2022.

However, the inflation rate is still higher than the 2% target set by the Federal Reserve.

This decline in the inflation rate is called disinflation, where prices continue to increase but at a slower pace.

Unlike deflation, where prices decline outright, disinflation keeps prices increasing.

For example, consumer prices in November 2023 increased by 3.1% compared to a year earlier, which is lower than the peak rate of 9.1% experienced in June 2022.

Disinflation is seen as a more favorable outcome compared to deflation, as it allows the Federal Reserve to control inflation without causing a sudden decrease in prices, which can be harmful to the economy.

Deflation can lead to a downward spiral of falling prices and decreased consumer spending and economic activity.

  • Overall sentiment: neutral
  • Positive

    “Disinflation is what we want to see right now,” said Sarah House, senior economist at Wells Fargo Economics.”

    “Incomes and wages have exceeded inflation in the pandemic era, meaning the average person’s buying power has actually increased despite rising prices.”


    “Broad and sustained deflation is typically a bad outcome, economists say.”

    “Deflation, by contrast, is when average prices are falling outright. The inflation rate flips negative.”

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