Inflation Eases but Trade Policy Clouds Outlook

Despite a stretch of volatility in recent weeks, mortgage rates have shown little net movement. This week, trading was again influenced by shifting headlines about tariffs. With inflation data matching expectations, markets responded calmly, and mortgage rates ended the week slightly lower.

Tariff Uncertainty Continues

Although it was a short holiday week, news related to tariffs remained a focal point. On Friday, President Trump proposed raising tariffs on the European Union to 50 percent beginning June 1 due to stalled trade talks. However, just before markets opened on Tuesday, he postponed the increase until July 9. A federal trade court added further uncertainty on Wednesday by ruling that the President does not have the authority to impose tariffs under the Emergency Economic Powers Act. The administration was given ten days to adjust its policy to comply with the ruling. On Friday, President Trump also accused China of breaching the preliminary trade agreement from May 12 in which both nations paused most tariffs for ninety days. For the real estate market, continued volatility in trade policy adds uncertainty about future inflation and interest rate movements. Buyers and sellers alike may benefit from acting before potential rate swings take hold.

Core Inflation Moves Lower

The Fed’s preferred measure of inflation, the Core PCE Price Index, showed a 2.5 percent increase in April compared to one year ago. This was a decline from 2.7 percent in March and marked the lowest annual reading since March 2021. While this downward move is encouraging, inflation remains above the Fed’s two percent target. Future changes in trade policy and tariff impacts remain key variables in determining whether further improvement is possible. For real estate, cooling inflation is typically a positive signal for mortgage markets. If this trend continues, it may help keep rates more favorable in the months ahead.

Consumer Confidence Rebounds

After five consecutive monthly declines, the Conference Board’s Consumer Confidence Index rose sharply in May to 98, far above the consensus forecast of 86. The rebound was largely attributed to reduced fears about a damaging trade war. Consumers expressed greater optimism across a range of areas, including job prospects and the performance of the stock market. Higher consumer confidence often translates into stronger housing demand. For sellers, this renewed optimism may increase buyer activity, particularly in markets where affordability remains reasonable.

Real Estate Perspective

With inflation showing signs of improvement and confidence rebounding, the broader economic picture remains mixed but manageable. For buyers, steady mortgage rates and a more positive outlook may provide an attractive window. For sellers, strong pricing depends on how quickly they can position their homes amid ongoing economic uncertainty.