In July, the annual rate of in?ation as measured by the Retail Price Index stood at -0.05 per cent, the NSO said.

In the month under review, the annual rate stood at -0.05 per cent.  A year earlier the annual rate was 2.08 per cent.

The largest downward impacts on annual in?ation were brought about by the Water, Electricity, Gas and Fuels Index (-0.62 percentage points) and the Transport and Communication Index (-0.25 percentage points).  This was mainly due to lower electricity rates and air fares respectively.

The main upward impacts were recorded in the Recreation and Culture Index (0.30 percentage points), the Beverages and Tobacco Index (0.22 percentage points) and the Household Equipment and House Maintenance Costs Index (0.12 percentage points) mainly due to higher prices of newspapers, cigarettes and household appliances respectively.

The twelve-month moving average rate was 0.48 per cent.

Deflation

Definition: When the overall price level decreases so that inflation rate becomes negative, it is called deflation. It is the opposite of the often-encountered inflation.
Description: A reduction in money supply or credit availability is the reason for deflation in most cases. Reduced investment spending by government or individuals may also lead to this situation. Deflation leads to a problem of increased unemployment due to slack in demand.

Central banks aim to keep the overall price level stable by avoiding situations of severe deflation/inflation. They may infuse a higher money supply into the economy to counter- balance the deflationary impact. In most cases, a depression occurs when the supply of goods is more than that of money.

Deflation is different from disinflation as the latter implies decrease in the level of inflation whereas on the other hand deflation implies negative inflation.