U.S. inflation rate may gradually return to 2%

The Fed released the September FOMC minutes, which suggest that while the majority at the Fed were not too concerned about financial developments, they preferred waiting for additional information before raising rates. Specifically, the minutes noted that developments over the intermeeting period had not materially altered the Committee's economic outlook. 

Nevertheless, in part because of the risks to the outlook for economic activity and inflation, the Committee decided that it was prudent to wait for additional information confirming that the economic outlook had not deteriorated and bolstering members' confidence that inflation would gradually move up toward 2 percent over the medium term."

Many members said that the improvement in labor market conditions met or would soon meet one of the Committee's criteria for beginning policy normalization. But some indicated that their confidence that inflation would gradually return to the Committee's 2 percent objective over the medium term had not increased, says Barclays in a research note on Friday.

The minutes also noted, "Most members agreed that their confidence that inflation would move to the Committee's inflation objective would increase if, as expected, economic activity continued to expand at a moderate rate and labor market conditions improved further." The minutes were perceived as modestly dovish, likely as the data since the September meeting have been weaker than expected.