Mortgage Rates Dip Slightly
While it has been a volatile period, there has been little net change in mortgage rates over the past three weeks. News about tariffs continued to influence trading last week. The latest inflation data was right on target, causing little reaction. Mortgage rates ended last week a bit lower.
Tariff Uncertainty Intensifies
Tariff headlines continued to pour in during the short holiday week, although their impact was relatively minor. Last Friday, President Trump had recommended raising tariffs on the European Union to 50% beginning June 1 due to a lack of progress on negotiating trade deals. Before the start of trading last Tuesday, however, he had agreed to postpone the higher tariffs until July 9. Last Wednesday, a federal trade court ruled that the President is not authorized to impose tariffs under the Emergency Economic Powers Act, adding to the uncertainty about future trade policy. The Trump administration was given ten days to make the necessary changes to comply with the ruling. Last Friday, President Trump accused China of violating the preliminary trade agreement reached on May 12 with the U.S. in which the two countries suspended most tariffs on each other for 90 days.
Core PCE Hits 3-Year Low
Fed officials keep a close eye on inflation, and the PCE price index is their favored indicator. In April, Core PCE was 2.5% higher than a year ago, down from an annual rate of increase of 2.7% last month, and the lowest level since March 2021. Progress toward the 2.0% target of the Fed has not been easy, and this desired level has not been achieved since February 2021. The big question is how large an impact higher tariffs will have on future inflation levels.
Consumer Confidence Surges
After five straight months of declines, the report on consumer confidence published by the Conference Board finally bounced back, mostly due to easing concerns about a damaging trade war. The index jumped to 98 in May, far above the consensus forecast of 86. Optimism increased significantly in many areas including employment prospects and the outlook for the stock market.
Mortgage Rates for the week of 6-2-2025