Yesterday we described the circumstances under which inflation can be considered a good thing:

“Rising inflation is considered a good thing when it’s in response to an expanding economy and all that goes with it (higher wages for example), and when it inspires/allows the Fed to gently raise interest rates to keep it from becoming bad (high) inflation, while building the platform (higher interest rates) from which to do battle (reduce interest rates) with the inevitable next recession.”

As well as when it is unequivocally a bad thing:

“Rising inflation, alas, is a bad thing when it comes by way of government(s) meddling with the private sector (read protectionism).” 

And noted that the June Producer Price Index offered up a bit of both:

“Today’s PPI report came in pretty hot, with PPI Final Demand, Ex Food & Energy, and Ex Food, Energy, & Trade Services all beating expectations. Ex Food & Energy hit the highest level since 2011 on a YoY basis. That bodes well for the overall trend in inflation, and is also a reflection of bothtightening labor markets and the impacts of tariffs on intermediate and final goods.”

The latest read on consumer prices, however, has yet to reflect the bad kind. And that I suspect has the Fed in good cheer this morning. The market (Dow futures up 200 pre-market) doesn’t seem to mind:

“Yesterday’s producer price report did show signs of acceleration including for trade services and tariff-related metals, but pressure here isn’t leading to, at least yet, pass through to the consumer. Today’s report is very positive for Federal Reserve policy makers who are now trying to hold inflation steady.” Econoday