THE IDEA IN ONE LINE
A slower rise is still a rise.
The same groceries. A bigger bill.
A smaller jump. Still a higher price.
You hear that inflation is falling. Then you go shopping, and your usual groceries still cost more. Both things can be true.
Inflation is a broad rise in prices. When inflation falls but stays above zero, prices are rising more slowly. They have not gone back down.
The same shopping bag, a different bill
Imagine buying exactly the same groceries each week. At first, the bag costs $100.
A year later, it costs $110. Another year later, it costs $113.30.
The first increase adds $10 to your bill. The next adds only $3.30. That second jump is smaller, but you still pay more.
A smaller price rise is still a price rise.
Think of a car slowing down
A car can slow from 60 to 30 miles per hour and still move forwards. Prices can rise more slowly and still move upwards.
This is just an analogy. The shopping bag is the example that shows what happens to your bill.
What would cheaper shopping look like?
For the bag to become cheaper, its price would need to fall: for example, from $110 to $105.
That would be a drop in the price of this bag. Economists use the word deflation when prices fall more broadly, rather than just one item getting cheaper.
One question to ask about a headline
If inflation is lower, ask: “Are prices still rising?” If the answer is yes, a bigger shopping bill makes sense.
Your own bill also depends on what you buy. A national average cannot describe every household's shopping.
Optional: see the calculation
A 10% rise takes the bag from $100 to $110. A further 3% rise adds $3.30 to that new price.
$100 × 1.10 = $110
$110 × 1.03 = $113.30
The price ends up 13.30% above the start. The second increase applies to $110, so simply adding 10 and 3 misses a small part of the change.
Source: European Central Bank: what inflation means.
All prices are hypothetical. We use dollars to make the example easy to picture; the same idea works in other currencies.