Will a cooling labor market keep mortgage rates below 7% in 2026?

Recent labor data shows slower job growth and a slight drop in unemployment due to lower labor force participation, offering the Federal Reserve some relief in considering rate hikes. Inflation pressures are expected to persist through 2026, with a possible rate increase in early 2027. Fed officials remain cautious, emphasizing the need to reach a 2% inflation target amid risks from geopolitical conflicts and rising costs linked to AI investments.