"This was great news – there’s absolutely no sign of inflation in the economy right now – but there’s a lot of uncertainty out there right now coming from Argentina," he says. Latin America’s third largest economy has mounting debt, is mired in a recession, and is stuck with a currency that it can’t afford. "The Argentinian peso is tied one-to-one with the dollar, and with the dollar so strong, countries with devalued currencies like Brazil are killing it on exports because their goods are that much cheaper." If Argentina buckles under the pressure and devalues, the whole region will take a beating from the markets. The upside? If Thursday’s Consumer Price Index report holds form, you can bet the farm on the Fed's leaving rates alone in August. "Raising rates would push up the dollar, which would hurt Argentina even more." One less thing to worry about.
OK, where were we? The Fed put the markets at ease on June 30 by shifting back to a neutral bias on rate hikes, and the past two weeks have been just long enough to get everyone back on pins and needles again. Well, never mind. The Producer Price Index for June, which measures inflation before it hits the consumer, actually dipped an unexpected 0.1 percent, reported the Commerce Department on Wednesday. The stock markets, thus relieved anew about Alan Greenspan’s plans for August, did a little jig at the opening bell — but then took a dive into negative territory by noon. What gives? Despite the good news, says TIME senior economics reporter Bernard Baumohl, all is not well on the Street these days.