Consumer prices fell for a third straight month in June thanks to lower energy costs.  The Labor Department said earlier this morning their Consumer Price Index dipped 0.1% last month after falling 0.2% in May.  Consumer prices have not declined for three consecutive months since the period from October to December 2008.  Excluding the more volatile food and energy components the "core rate" of inflation at the consumer level edged up 0.2% in June -- after posting a 0.1% gain in May.  On a year-over-year basis, the "core" inflation rate rose 0.9% -- its slowest pace since 1966.   The story here is that producers and businesses have little pricing power.  Until this dynamic changes -- inflation will remain subdued -- giving the Federal Reserve plenty of room to keep their benchmark short-term interest rates exceptionally low well into next year.  And that is good news for the prospects of sub-5.25% 30-year fixed conforming mortgage interest rates into at least the summer of 2011.   Next week's economic calendar is very thinly populated with macro-economic data.  The week will be bookended by Tuesday's release of the June Housing Starts and Building Permits figures on Tuesday and Thursday's June Existing Home Sales data.  Sandwiched in between these economic reports will be the much anticipated semi-annual congressional testimony on the health of the economy from Fed Chairman Bernanke.  He will appear on Wednesday before the Senate Banking Committee -- followed by an encore performance for the House Financial Services Committee on Thursday.  Market participants around the globe will tune-in to hear what the Fed Chairman has to say about the pace of recovery, the job growth outlook and what, if anything, the Fed intends to do should economic conditions worsen.  In my judgment current prices in the mortgage market already reflect investors' concerns about the issues Mr. Bernanke will address during this testimony.  If my assessment proves accurate, this event will exert little, if any influence on the trend trajectory of mortgage interest rates.


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