Why Prices Can Rise When Inflation Falls: A Two-Period Example

When a headline says inflation has fallen, it is easy to assume that prices have become cheaper. But the price level and the rate of price increases are different measures. The following two-period calculation illustrates the distinction; it is not investment or budgeting advice. Its figures are hypothetical teaching examples, not actual Turkish inflation data.

Let's have a hundred liras first

Suppose an example price rises by 10% from 100 TL to 110 TL in the first period. In the second period, let the increase slow to 5%. The new price is 110 × 1.05 = 115.50 TL. The rate of increase has fallen, but the price has not: it has risen more slowly.

In order for the price to fall, the corresponding period change must be in the negative direction. The only price example used here does not represent the entire structure of a real consumer price index. It only makes the mathematical difference between 'speed' and 'level' visible.

What period does the month compare to the year?

In an example of a historical bulletin of TÜİK Changes are given separately to the previous month, the same month of the previous year, the December month of the previous year, and the twelve-month averages. These are different comparison windows. When reading the percentage in the news, check which window the title uses.

This link is the May 2025 newsletter; it should not be presented as today's or this month's inflation rate. The correct publication period should be selected on the official portal when current data is required. The fact that an old table appears as a result of current search does not mean that the data is new.

Don't confuse percentage with percentage

In our example, the rate falls from 10% to 5%. The difference is 5 percentage points. Relative to the original rate, the reduction is 50%, because 5 is half of 10. Saying only ‘it fell by 5%’ leaves these two meanings unclear.

When preparing a share, type what changes next to the number: price, rate of increase, difference between two ratios? Do not cut out the axis and period labels if you are using a graph. Simplifying the visual should not erase the basic knowledge of the comparison.

Test the headline in your own sentence

After reading the article, fill in the structure: 'This indicator, compared to this period, has changed in this direction.' If you cannot set this sentence, the meaning of the number is not clear yet. Do not use the ratio of another period in the same sentence.

This article is not a financial advice, price prediction or personal inflation account. The goal is not to confuse two separate claims in the economic news. When you separate the price level and the rate of increase, you can read more accurately what it says before labeling a headline as good or bad news alone.