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June PCE inflation fell to 3.7% (two‑month low) and 0.1% m/m, but oil‑driven price pressure keeps 30‑yr mortgage rates near 6.75%, shaping housing market
The Personal Consumption Expenditures (PCE) price index slipped 0.1% month‑over‑month in June, delivering an annual inflation rate of 3.7% – the lowest level in two months and exactly on economists’ forecasts [2]. The modest decline comes as oil‑related price pressures ease, yet mortgage rates remain anchored in the mid‑6% range, keeping housing affordability under pressure.
| At a glance | |
|---|---|
| PCE inflation (annual) | 3.7% (vs. 4.1% in May, on target) |
| PCE month‑over‑month change | –0.1% (vs. +0.7% in May) |
| Core PCE (annual) | 3.3% (down from 3.4% in May) |
| 30‑yr mortgage rate | 6.75% (≈ +1.0% vs. March) |
June’s 0.1% month‑over‑month drop in the PCE index reversed a six‑year streak of rising prices, marking the first decline since 2020 [2]. The slowdown was led by a 9.2% fall in gasoline and energy inflation, which had surged to 20.9% in March after the Iran conflict began. Although a tentative cease‑fire was discussed in June, the conflict resumed, leaving future energy price trends uncertain. Core inflation, which strips out food and energy, also eased to a 0.1% monthly gain, down from 0.3% in May, indicating broader price moderation beyond volatile energy components.
Even as inflation cooled, mortgage rates have hovered near 6.75% on 30‑year conventional loans, a full percentage point above the March level [1]. Experts attribute the persistence of high rates to lingering inflation concerns and the ongoing Iran war, which could push oil prices higher and force the Federal Reserve to maintain a tighter policy stance. The CME Group’s FedWatch tool shows a roughly 75% probability of a rate hike at the September Fed meeting, reinforcing expectations that mortgage rates will likely remain in the mid‑to‑high‑6% band for the remainder of 2026 [1].
The June inflation dip offers a brief reprieve, but the unresolved Iran conflict and entrenched price pressures mean that both inflation and mortgage rates could swing sharply in the coming months, leaving the housing market and broader economy in a state of heightened uncertainty.
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AI-assisted synthesis by the TrendWatcher Editorial Desk · sourced from 2 outlets · Jul 31, 2026 · How we report
The decline was largely driven by a temporary reduction in gasoline prices as the Iran war appeared to be moving toward resolution.
The Fed left its key interest rate unchanged, despite ongoing high inflation and a spike in energy prices.
The GDP deflator showed a 6.3% annualized increase in Q2, signaling that inflation across all goods and services is rising sharply.
No, core GDP inflation, which excludes energy and food, also rose significantly, indicating that price pressures extend beyond energy costs.
The sources point to new tariffs on trade partners and the ongoing war in Iran as factors that have pushed up food, gas, and other basic costs.