June inflation data provided some relief for consumers and the bond market. Headline inflation slowed from 4.2% to 3.5% and core inflation fell back to 2.6%. While still above the Fed’s target of 2%, the progress on inflation was a result of the Iran war ceasefire. However, renewed hostilities and the end of the ceasefire are placing upward pressure on oil prices. Rising energy costs are expected to push July inflation higher. Additional pressure will come from a renewed administration effort to establish tariffs. Inflation remaining in the 3% range likely eliminates any hope for an additional Federal Reserve rate cut for 2026. And some believe the new Warsh-led Fed may increase interest rates before the end of the year. Inflation is affecting building materials as well. Residential construction input prices were 6.2% higher than a year ago, including a 4.6% increase for building materials. Given this, 2026 will be the second consecutive year of declines for single-family home building.