The inflation readings released this week showed that current inflation levels remain low, which also was positive for mortgage rates. The core PCE price index, the inflation indicator favored by the Fed, revealed that core inflation was just 1.5% higher than a year ago, down from an annual rate of 1.8% two months ago. In addition, annual wage growth remained steady near the levels seen since late 2015. 

Despite the tame inflation data, recent comments suggest that most Fed officials still expect inflation to gradually rise toward the Fed's target level of 2.0% over the medium term. For example, the Fed's Jerome Powell said on Thursday that weak inflation readings over the last couple of months can be explained by "transitory" factors and that he expects wage inflation to increase. However, some key officials are beginning to question whether this will take place. The Fed's Lael Brainard this week said that she might soften her outlook for future monetary policy if we continue to see weak inflation data.