Interest rates are being set by the Fed's intervention and purchase of 61% of all Treasury issue, and 90% of everything on the long end.
They, meaning Treasury and the Fed, cannot afford any increase in the interest rate, as debt service would soon take up the majority of the budget if rates were to increase by two hundred basis points (2%). They will eventually, but the Fed will fight it every step of the way.
Understand that inflation is nothing more than the increase in the available amounts of currency and credit available. That has been occurring since 2008 on an exponential basis, and the ramp in commodity prices is in fact a corollary of this.
Deflation is the opposite, meaning a decrease in the amount of currency and credit, making the value of both increase.
Also keep in mind that supply and demand play a role in whether goods/services rise or fall in price. The glut of homes on the market has depressed the overall price, and this will not reverse until the over supply has been cleared.
Deflation is only a bad thing if you're in debt, as it makes the debt harder to service. Since our entire currency/credit system is debt based, deflation is feared by those in charge of it, and those who make money from it. This includes banksters and politicians.
