Mortgage rates eased this week, erasing the 30-bps increase in the second half of May. Personal consumption data last week suggested consumer spending is slowing down. At the same time, manufacturing activity pulled back after a brief rebound last month. Lastly, the most recent job openings data suggested that the labor market has loosened considerably. These are all signs the US economy is cooling and that inflation could slow.
While investors expect that further disinflation will lead to Fed rate cuts later this year, a stronger than expected increase in hourly earnings in the May jobs report could cause some repricing activity.
Expect more rate volatility ahead as the Fed and investors wait for more conclusive evidence of a return to low, stable and more predictable inflation.