One reason the Federal Reserve (Fed) has delayed initiating its first rate hike in years: Headline U.S. inflation has been persistently running below the stated 2 percent level the central bank seeks to target.

While the Fed certainly considers much more than the superficial headline number in its analysis of inflation, some of those who interpret the Fed’s actions make this overly simplistic assertion: Inflation is too low today and therefore justifies the maintenance of low policy rates.

I disagree. In my opinion, the discussion of inflation as a simple headline number is too one-dimensional. To understand why, it’s helpful to take a deeper look at the makeup of U.S. inflation.

The Impact of U.S. Inflation

In reality, according to my team’s analysis of data accessible via Bloomberg, inflation is experienced in vastly different ways across income groups, industries and geographies.

In the U.S., for example, those in the bottom quintiles of income distribution spend a much larger percentage of their expenses on food-, energy-, and rent-related expenditures than higher earners. As such, a significant increase in the energy, rent or food expenditure categories would likely adversely impact lower income households much more than it would those in the upper income quintiles. Likewise, the disinflationary tailwind of lower oil and gas prices should provide a much greater disposable income boost to lower income households than higher income groups, as the former generally spend a larger share of income on energy.

Even more importantly, inflation can be disaggregated into “good” and “bad” inflation.

According to my team’s analysis of data via Bloomberg, “good” inflation can be viewed as price increases resulting from accelerating economic activity and a strong labor market, and thus, most likely to further support rising wages and employment. This sort of inflation most often shows up in expenditure categories such as vehicles, recreation, transportation, medical care, home furnishings and housing. In other words, price rises in these categories are likely a result of an improving economy.