FOMC meeting minutes chock full of inflation worry
"During the twelve months ending in March, overall inflation rose at a slightly faster pace than that in the preceding twelve-month period, while core prices for the same period increased a bit more slowly than in the previous year."
"Some financial-market and survey indicators suggested that inflation expectations, both for the upcoming year and for the longer term, had moved up since the
"Meeting participants expressed some concern about recent price developments and their implications for inflation prospects. Core consumer inflation lately had been a little higher than expected. Moreover, energy prices had risen steeply in the period since the March meeting, and, although pass-through apparently had been limited to date, the most recent increases might be reflected to a greater degree in core inflation in coming months. Participants noted that prices of non-energy commodities, such as industrial metals and building supplies, also had been climbing. The recent decline in the dollar was another factor that could add to inflation pressures, although the effect of prior changes in the foreign exchange value of the dollar on core consumer prices had apparently been limited. Business contacts had reported continued shortages of certain types of skilled labor and related wage pressures in some occupations, which would tend to boost costs"
AND lastly ...
"On balance, participants judged that inflation expectations had risen somewhat--a development that would have to be taken into account in policymaking and warranted close monitoring."
All told, this is not the nice friendly Fed the market was expecting in my view. They even discussed a 50-point rate hike (in all fairness, they also discussed keeping rates unchanged). Bonds sold off pretty hard when the numbers came out, then bounced. Not sure where they'll settle out, but it's possible we see new price lows in bonds this week, especially if Friday's jobs report is strong enough on the headline growth and wage stats.