| This week’s biggest economic news was the release of the Federal Reserve’s preferred inflation measure, the Personal Consumption Expenditures (PCE) index. Headline PCE inflation rose to 4.1% year-over-year, while core PCE, which excludes the more volatile food and energy categories, came in at 3.4%. The difference between headline and core inflation suggests that much of the recent inflation pressure continues to be driven by energy costs related to the Middle East conflict rather than broad-based price increases throughout the economy.
The encouraging news is that energy prices have moved sharply lower over the past two weeks. During the height of the conflict and fears surrounding the Strait of Hormuz, Brent crude briefly traded above $120 per barrel and peaked near $126. Today, Brent crude has fallen back to approximately $72 per barrel, its lowest level since before the conflict began. If these lower oil prices hold, gasoline and other energy costs should begin flowing through to future inflation reports and help reduce headline inflation readings in the months ahead. Despite the sharp drop in oil prices, Treasury yields have remained stubbornly elevated, with the 10-year Treasury yield still hovering around 4.4%. As a result, mortgage rates have seen little improvement this week. Bond investors continue to focus on persistent inflation pressures, strong economic growth, and the possibility that the Federal Reserve may keep rates higher for longer despite easing energy prices. Other economic news this week was mixed. First quarter GDP growth was revised higher to 2.1%, weekly jobless claims remained relatively low, and consumer spending continued to show resilience. While these are positive signs for the broader economy, they also reinforce the bond market’s belief that the Federal Reserve may not be in a hurry to lower rates. The next major report for markets will be next week’s employment numbers, which could provide additional clues about the direction of inflation, Treasury yields, and mortgage rates during the second half of the year. Mortgage rates – Every Thursday, Freddie Mac publishes interest rates based on a survey of mortgage lenders throughout the week. The Freddie Mac Primary Mortgage Survey reported that mortgage rates for the most popular loan products as of June 25, 2026, were as follows: The 30-year fixed mortgage rate was 6.49%, almost unchanged from 6.47% last week. The 15-year fixed was 5.84%, almost unchangedfrom 5.81% last week. The graph below shows the trajectory of mortgage rates over the past year. Stock markets – The Dow Jones Industrial Average closed the week at 51,876.11, up 0.6% from 51,564.70 last week. It is up 7.9% year-to-date from 48,063.29 on December 31, 2025. The S&P 500 closed the week at 7,354.02, down 2% from 7,500.58 last week. The S&P is up 7.4% year-to-date from 6,845.50 on December 31, 2025. The Nasdaq closed the week at 25,297.62, down 0.9% from 25,517.93 last week. It is up 8.8% year-to-date from 23,241.99 on December 31, 2025. U.S. Treasury Bonds – The 10-year treasury bond closed the week yielding 4.38%from 4.46% last week. The 30-year treasury bond yield ended the week at 4.87%, down slightly from 4.90% last week. We watch bond yields because mortgage rates follow bond yields. Have a great weekend! |
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