Despite a small rise in the past week, mortgage rates have been relatively flat in June, much lower than this Spring’s peak reached back in April. The recent economic data suggest economic growth will slow and inflation could return to the Fed’s two-percent target sooner than previously anticipated.

Treasury yields and mortgage rates reflect expected economic activity and inflation. Moderating consumer spending, falling home sales and rising home vacancy rates point to lower aggregate demand and easing price pressures in the months ahead. 

This week’s release of the latest Personal Consumption Expenditures data will likely cause investors to adjust their inflation forecasts. Core inflation is expected to have moderated further over the past month. However, a higher than expected inflation print could undo progress and push rates higher.