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Economics vocabulary · Economic News and Data

Base effect

Meaning in economics, with examples

nounAdvanced term

In economics, base effect means: The effect on a year-on-year rate caused by an unusually high or low figure in the same month of the previous year, rather than by current changes.

In Turkish: baz etkisi

How it is used

Common in inflation commentary: if prices jumped a year ago, annual inflation falls when that month drops out of the calculation, which is called a favourable base effect. Analysts say base effects will push inflation up or down in the coming months.

Example sentences

  1. Annual inflation will drop next month because of a strong base effect from last year's energy price rise.

  2. Part of the fall in inflation is just a base effect, not a real change in price trends.

Common collocations

  • favourable base effect
  • unfavourable base effect
  • base effects
  • due to base effects
  • year-on-yearCompared with the same period one year earlier, for example sales in March this year compared with sales in March last year.
  • month-on-monthCompared with the previous month; used to describe how a figure such as prices or sales changed from one month to the next.
  • headline inflationThe overall inflation rate based on all items in the consumer price index, including volatile prices such as food and energy.
  • disinflationA fall in the rate of inflation: prices are still rising, but more slowly than before.

More terms: Economic News and Data

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