We saw anice drop in interest rates last week. “Nice” because the drop in rates mayportend a trend toward lower rates, although nothing ever moves in a straightline. Let’s see what happened.

The Consumer Price Index (CPI) for June was reported on Wednesday and showed that consumer prices are falling, which is wonderful for the interest rate sensitive housing sector. The headline CPI for June, which includes food and energy, came in at 3 percent year-over-year; the slowest rate since March 2021. Just last year CPI readings were over 9 percent, so this was a welcome sign for all Americans. It was down from a 4 percent headline rate in May, while core inflation (which excludes volatile food and energy prices) only grew 0.2 percent M/M, after climbing 0.4 percent or more for the past six months.

Orion is not among them, but critics are quick to point out that this sizable decline ismainly because oil prices were $70 per barrel in June, almost half of what they were last June. We’ll take it, right? It also highlights how important it is to keep oil prices low.

All this good news on inflation sparked the party in the bond market as our brokers know.The 10-yr Note yield dropped from multi-month highs of 4.09 to 3.83 percent very quickly.  Some Fed members are already suggesting that inflation is approaching "normal levels", while others say we are nearing the end of rate hikes. This is a very different tone that was being shared a couple of weeks ago when Fed members were poundingthe table for more hikes and higher rates for longer. We can all expect one more Fed rate hike on July 26.

Remembering that the Federal Reserve does not set mortgage rates but is influenced by the same economic news that does move mortgage rates, after this month there is no Federal Reserve Open Market Committee meeting until September. So, any moves in mortgage rates will be due to actual economic news. And we can expect plenty of it, as always.