Core PCE, which strips out volatile food and energy prices, rose by 0.3%. While the annual reading ticked lower from 4.7% to 4.6%, core inflation has seen a slower decline from its 5.4% peak.

What’s the bottom line? Inflation is the arch enemy of fixed investments like Mortgage Bonds because it erodes the buying power of a Bond's fixed rate of return. If inflation is rising, investors demand a rate of return to combat the faster pace of erosion due to inflation, causing interest rates to rise like we saw throughout much of last year.

While inflation moved lower in May, June’s data could bring even more progress. PCE is a rolling twelve-month report, meaning that if we add the previous 12 monthly readings and account for rounding and compounding, we come up with the year-over-year figure. When the data for this June is released on July 28, it will replace the headline inflation reading for June 2022, which was elevated at 1%. If we see another 0.1% reading for this June like we just did for May, year-over-year inflation would drop to around 2.8%.