07/17/2026
Mortgage Market Guide
A LOOK INTO THE MARKETS
For the week of July 17, 2026 - Vol. 24, Issue 29
Mortgage rates pulled back from one-year highs this week after markets responded favorably to comments from Fed Chairman Kevin Warsh and a pair of encouraging inflation reports. The combination gave bonds a much-needed boost and reminded investors that inflation, not politics, remains the primary driver of interest rates. Let's break it down.
Warsh on the Hill
Kevin Warsh's semiannual testimony on Capitol Hill captured the market's attention. While his comments covered a wide range of economic topics, one message stood out: the Federal Reserve cannot afford to become complacent on inflation. Warsh emphasized that the Fed's credibility depends on maintaining price stability and made it clear that persistent inflation is something policymakers simply cannot tolerate.
Markets interpreted his remarks as reinforcing the Fed's commitment to keeping inflation under control while remaining flexible should inflation continue to cool. That helped improve investor confidence in the bond market, pushing bond prices higher and mortgage rates lower from the week's highs.
Although one speech doesn't change monetary policy, markets often react to influential voices when they reinforce the broader narrative. This week, that narrative favored bonds.
Deflation helps bonds
The week's biggest economic news came from the June Consumer Price Index (CPI) and Producer Price Index (PPI). Both reports showed outright monthly price declines, the first broad-based monthly deflation readings since 2020.
For the bond market, that's welcome news.
Lower inflation reduces pressure on the Federal Reserve to keep interest rates elevated for an extended period. If inflation continues trending lower, policymakers gain greater confidence that price pressures are moving back toward their long-term target. That opens the door to future rate cuts and generally supports lower long-term interest rates, including mortgage rates.
While one month doesn't establish a trend, this week's reports were certainly a step in the right direction.
Oil spikes
Not all the news was positive.
Escalating tensions surrounding the U.S. and Iran sent crude oil prices briefly toward the $80-per-barrel level. Energy prices remain one of the quickest ways inflation can reaccelerate because higher fuel costs ripple through transportation, manufacturing, and consumer prices.
If oil remains at or above these levels for an extended period, it could begin showing up in future inflation reports and potentially offset some of this week's encouraging data. It's something the bond market and the Federal Reserve will be watching closely.
Looking ahead
The economic calendar is relatively quiet next week, with New Home Sales and Weekly Initial Jobless Claims being released.
We'll also enter the Federal Reserve's blackout (or quiet) period ahead of the next FOMC meeting. During this time, Fed officials refrain from making public comments about monetary policy, interest rates, or the economic outlook.
For now, inflation continues moving in the right direction, bonds have responded favorably, and mortgage rates have improved from their recent highs. The question is whether that momentum can continue.
Todd Schindler
Senior Loan Officer | NMLS #264405
O: 314.400.4089 | C: 636.387.3112
[email protected]
17280 N Outer 40 Rd, Suite 101
Chesterfield, MO 63005
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