For the bond market, the release of the Fed minutes was this week’s biggest news. The Fed described employment positively. They also noted personal consumption expenditures and capital expenditures were “solid”. Housing was mixed, but continued to show a general, slow recovery.Industrial production was weak, but largely due to the strong dollar and weak international environment.As for inflation, they noted that overall CPI was weak, but expected it to rise with oil and import prices over the next 12-18 months.As for rates, the Fed felt the next hike would be in December:

Members emphasized that this change was intended to convey the sense that, while no decision had been made, it may well become appropriate to initiate the normalization process at the next meeting, provided that unanticipated shocks do not adversely affect the economic outlook and that incoming data support the expectation that labor market conditions will continue to improve and that inflation will return to the Committee’s 2 percent objective over the medium term.   

The BLS reported CPI this week.  Total CPI increased .2% Y/Y while core rose 1.9%.The following FRED chart shows that core prices are close to the Fed’s stated 2% level, while total CPI remains near 0%:

Fed hawks recently argued that weak oil prices were the primary reason for the weak total CPI reading.  Scott Grannis makes the same observation:

The year over year change in the CPI has been roughly zero for the past 10 months, but that’s purely a function of sharply lower oil prices. Ex-energy, consumer price inflation has been running about 2% per year on average for the past 13 years. What’s notable is not the low level of headline inflation, it’s the continued existence of 2% core inflation despite the fact that economic growth has been unusually sluggish for a number of years.

He offers the following chart: