Strong economic data continued to keep mortgage rates up this last week, as price pressures seem slow to dissipate. The upward revisions to first quarter GDP showed impressive increases in consumer spending, while rising construction spending points to a resilient US economy. 

Stubborn core inflation remains well above the Federal Reserve’s objective, but relief may be in sight. The most recent Personal Consumption Expenditures (PCE) data points to softer consumer spending growth in the second quarter, a sign that price pressures may continue to ease and potentially keep mortgage rates from moving higher.

Bond yields and mortgage rates that follow them depend on current inflation, expected inflation and the economic outlook. 

This week’s employment data – particularly changes in wage growth – will likely cause large swings in interest rates. In light of declining labor productivity growth, lower wage growth would suggest inflation could be headed in the right direction. Cooling inflation and a general economic slowdown would put downward pressure on long-term interest rates like the 10-year Treasury yield and in turn, mortgage rates.