When Will Mortgage Rates Improve? The New Inflation Metric the Fed is Watching
If you are currently sitting on the sidelines waiting for mortgage rates to improve before buying a home, you need to know what is happening behind the scenes at the Federal Reserve.
While the standard inflation headlines might look discouraging, a crucial shift in how the Fed measures economic data could pave the way for lower mortgage rates in the near future.
The Problem with Traditional Inflation Numbers
This week, we received the latest Personal Consumption Expenditures (PCE) report—the Fed’s preferred inflation metric. At first glance, the numbers look high:
- Headline PCE Inflation: 4.1%
- Core PCE Inflation: 3.4%
With these numbers sitting well above the Federal Reserve’s ideal 2% target, it is easy to see why mortgage rates have remained stubborn. However, these traditional metrics are often skewed by extreme, short-term economic volatility.
Enter the Dallas Fed Trimmed Mean
Because traditional inflation reports are heavily impacted by wild, temporary price swings—like sudden spikes in oil prices or the implementation of new tariffs—the Federal Reserve is beginning to pay close attention to a different data point.
Championed by former Fed Governor Kevin Warsh, this metric is known as the Dallas Fed Trimmed Mean.
How It Works
The Dallas Fed Trimmed Mean strips away the economic “noise” by removing the highest 31% and the lowest 24% of price changes from the monthly data pool.
By filtering out these extreme volatility swings, this metric provides a much clearer picture of true, underlying baseline inflation.
When you look at the market through this lens, the economic outlook changes entirely:
| Inflation Metric | Latest Reading |
| Headline PCE | 4.1% |
| Core PCE | 3.4% |
| Dallas Fed Trimmed Mean | 2.4% (up slightly from 2.3% last month) |
What This Means for Mortgage Rates
A core inflation reading of 2.4% is significantly closer to the Federal Reserve’s ultimate 2% goal than the headline numbers suggest. It is incredibly encouraging to see the Fed adapt and look at more modernized, accurate data points rather than relying purely on older, more antiquated methods.
The Bottom Line: If this underlying, trimmed inflation data continues to trend favorably and hold steady near the target, it creates the exact economic environment the Fed needs to confidently allow mortgage rates to move lower.
We will be keeping a very close eye on how this specific metric performs over the coming months.
Connect With Us This Weekend
Have questions about current mortgage options or want to map out your homebuying strategy? We are here to help you navigate the changing market.
We are available seven days a week from 8:00 AM to 8:00 PM. Give us a call today!
___________________________________________________________________________
Questions? Concerns? Ready to get started with my strategic buyer consultation?
Call me any day of the week, Monday- Sunday to get connected & learn about your options.
It’s never too soon to understand what you can afford!
303-500-3839
Brian@BrianManningTeam.com
LICENSED TO SERVE YOU IN:
- Colorado
- California
- Arizona
- Florida
- Wyoming
Oh yeah, want to get my weekly Friday Market Update straight in your inbox?? Join our mailing list!
Email me directly at Brian@BrianManningTeam.com