inflation rate
When the news says "inflation came in at 3.2 percent," it is reporting a speed, not a price. Inflation is the climbing of prices; the inflation rate is how fast they are climbing, expressed as a percentage over a year. It is the difference between a hill you barely notice and a wall you cannot keep up with. The same word, percentage, that measures a pay rise or a loan also measures how quickly your money is shrinking.
The inflation rate is the percentage change in a price index — usually the consumer price index — from one period to the next, normally year over year. The formula is simple: take the index now, subtract the index a year ago, divide by the year-ago index, and multiply by 100. If the CPI was 100 last year and 103 this year, inflation is (103 minus 100) divided by 100, times 100, equals 3 percent. Report it monthly and you get a running picture of whether prices are accelerating or cooling.
Because it is a rate of change, the inflation rate can fall while prices keep rising — that is disinflation, slower inflation, not falling prices. It only turns negative when prices actually drop, which is deflation. The rate also depends entirely on which basket and base period you choose, so headline inflation (everything) and core inflation (stripping out volatile food and energy) can tell different stories. This is why economists watch several measures rather than trusting a single number.
If the consumer price index rises from 250 in June last year to 260 in June this year, the annual inflation rate is (260 - 250) / 250 x 100 = 4 percent. Prices, on average, are 4 percent higher than a year ago.
The inflation rate is just the percentage change in a price index over a year.
A falling inflation rate does not mean falling prices — prices are still rising, just more slowly. That is disinflation. Prices only fall when the rate goes negative (deflation).