The Money PagesPrices Are Rising More Slowly. Are They Cheaper?
A smaller price rise is different from a price drop. Try a simple number example.
A made-up shopping basket costs $100.
The next year, its price rises by 10%. It now costs $110.
Then the price rises by 5%. Five percent of $110 is $5.50. The basket now costs $115.50.
The price is rising more slowly, but it's still going up.
The inflation rate tells us how quickly prices are changing overall. A lower rate can still mean rising prices. A broad fall in prices is called deflation.
Think of walking uphill more slowly. You're still going up! These numbers are made up to explain the idea.
Money words
Inflation rate
How quickly prices are changing overall.
Prices rising more slowly are still rising. A smaller increase is not the same as a price drop.
