Why markets both love, loathe less inflation

January could mark seven consecutive months of falling inflation compared to a year earlier. There is no empirical economic agreement on how many months makes a trend, but seven is as good as any for the dismal science.

This is the age of disinflation. Make no mistake, prices continue rising at an uncomfortable pace, but the rate of increase has slowed considerably since hitting a generation high in June. The latest look comes Tuesday, Valentine’s Day, with the release of the January Consumer Price Index.

Investors have been loving the deceleration of the inflation figures. As inflation has cooled, the appetite for stocks and bonds has warmed up.

So far, this scenario is the very early stages of what’s been called an “immaculate disinflation.” That is the clever name for a best-case economic picture of price hikes stabilizing at a much more comfortable level later this year — around the Fed’s target 2% annual inflation target — and staying there.

Inflationary pressures are easing through a combination of higher borrowing costs, repairs to the global supply chain and less consumer demand. A rapid fall may be welcomed by the Fed, but it can turn threatening to corporate profit growth.

Here’s how: Companies have raised wages more than 6% over the past year. That’s sticky inflation. It’s embedded in the cost structure of businesses while those same businesses are no longer able to raise prices as fast as they were months ago. The result squeezes profit margins, and firms look for other ways to boost bottom lines — like shedding jobs.

AHN YOUNG-JOON — THE ASSOCIATED PRESS A currency trader watches monitors near the screens showing the Korea Composite Stock Price Index, left, and the foreign exchange rate between the U.S. dollar and the South Korean won at the KEB Hana Bank headquarters in Seoul, South Korea, on Tuesday.