Softer PCE data sharpened bets on a cut – and mortgage pros took notice
The Federal Reserve heads into next week’s policy meeting with a little more room to ease, after its preferred inflation gauge showed price pressures continuing to edge back toward target in September.
For mortgage lenders and originators, the latest data keep alive expectations of a modest rate cut rather than a prolonged plateau in borrowing costs.
The core personal consumption expenditures (PCE) price index – the Fed’s favored inflation measure – rose 0.2% in September, leaving the annual rate at 2.8%. That is in line with forecasts on a monthly basis and a touch cooler year over year than economists have expected.
Headline PCE climbed 0.3% on the month and 2.8% from a year earlier, matching consensus, as firmer goods prices offset somewhat softer services inflation.
Personal income increased 0.4% while spending rose 0.3%, and the personal saving rate held at 4.7%, suggesting households still have limited buffers as borrowing costs stay elevated.
“PCE inflation is still running significantly above the Fed's 2% target, but is no longer accelerating,” Michael Pearce, chief US economist at Oxford Economics, said.
“We expect inflation will be stuck at close to 3% over coming quarters. However, once the the one-off boost to goods prices from tariffs falls out of the comparison, underlying trends suggest inflation will moderate close to, but still above, 2% by the end of 2026.”
The September report, delayed by the protracted federal government shutdown, is the last major inflation print before the Federal Open Market Committee convenes.
Another Fed rate cut is widely anticipated, yet mortgage rates near one-year lows suggest the move is already priced in.https://t.co/E5x7VFQR8B
— Mortgage Professional America Magazine (@MPAMagazineUS) December 4, 2025
Markets have already priced in a near‑certain 25‑basis‑point move, with implied probabilities of a cut hovering in the high‑80% range, according to the CME FedWatch tool.
For mortgage professionals, the message from September’s inflation snapshot is less about a single meeting and more about trajectory.
A Fed that views inflation as drifting, not surging, toward target offers the prospect of a gradual, potentially bumpy path to lower funding costs.
In that environment, the edge would lie with lenders and brokers who could move quickly when windows for refinancing, rate locks and credit‑box adjustments briefly open, rather than waiting for a once‑and‑done pivot that might never arrive.
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