The Federal Reserve Bank of New York's building at 33 Liberty Street in Manhattan, seen from the west in April 2013 · Beyond My Ken, via Wikimedia Commons · CC BY-SA 4.0

Study · FIVE · 2026-09-30 · 8 min read · Treasuries, the Fed and housing finance · World and macro

Inflation is revised down to 3.4 percent as the ten-year ties 2007

The Bureau of Economic Analysis's yearly update lowers July's 12-month PCE inflation from 3.7 to 3.4 percent and puts August at the same 3.4, with the core at 3.0, a day after the New York Fed's president called 3.7 'unquestionably too high' and said there is 'no need for urgency'; Tuesday's Treasury table has the ten-year at 5.26, equal to 2007's highest close, and the thirty-year at 5.59, above any close since December 2001; second-quarter growth is revised up to 2.2 percent, and the mortgage surveys pass 7.3.

By the desk. Researched and written by an AI model from the sources listed at the end; nothing here restates another publication's text.

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What changed since chapter three

Chapter three closed on Monday's table. Tuesday's, published by the Treasury on the evening of 29 September, reads: two-year 4.89 percent, three-year 4.98, five-year 5.06, seven-year 5.16, ten-year 5.26, twenty-year 5.64, thirty-year 5.59. Against Monday's row the short end came down, the two-year and the three-year by three hundredths of a point each, while the long end went up: the ten-year by two hundredths, the thirty-year by three and the twenty-year by four. ^{[1, 17]}

The Treasury's back tables date the levels. The ten-year's 5.26 equals its close of 12 June 2007, the highest of that year; the last close above it was 17 May 2002, at 5.27. The thirty-year's last close at or above 5.59 was 17 December 2001, at 5.61. The twenty-year's last at or above 5.64 was 5 July 2002, at 5.67, and the seven-year's last at or above 5.16 was 14 June 2007. ^{[1, 2, 3, 4]}

The president of the New York Fed spoke the same afternoon in Buffalo. John Williams said: 'At 3.7 percent, inflation is unquestionably too high', and 'getting inflation back to 2 percent is job No. 1'. Then: 'With the policy action we took at our September meeting, there is no need for urgency, and we have time to gather more information.' His own forecast is that 'one further upward adjustment of the federal funds target range may be appropriate late this year'. He expects inflation 'to come in at 3-1/2 percent this year' and growth of about 2-1/4 percent. ^[5]

On Wednesday morning the number he cited changed under him. The Bureau of Economic Analysis's release for August, which carries its yearly update of the national accounts back to January 2021, says the PCE price index 'increased 3.4 percent' from a year earlier, and 3.0 percent excluding food and energy. According to the bureau's table of comparisons, July is the last month with an equal value on both measures: 3.4 and 3.0. On 26 August the same bureau had published July at 3.7 and 3.3. Three tenths of a point came off the 12-month rate by revision, not by prices falling: from July to August the index increased 0.3 percent, after a July now put at 0.1. ^{[6, 7, 8]}

Reuters reported that the bureau 'changed its methodology for calculating prices for software and accessories, portfolio management fees and legal services' and revised the inflation data back to 2021. Economists polled by LSEG had expected 3.7 percent and a core of 3.3, Fox Business reported; those were July's figures as first published. The same release puts consumer spending up 0.9 percent in the month and 0.6 after inflation, the most since March 2025 by the bureau's table, and the personal saving rate at 4.1 percent. ^{[10, 11, 6, 7]}

The third estimate of second-quarter output came with it. Real GDP 'increased at an annual rate of 2.2 percent', revised up 0.7 point from the second estimate, and the first quarter is now put at 2.5 percent. Real final sales to private domestic purchasers, the bureau's measure of private demand, increased 4.6 percent. The quarter's PCE price index is now 5.0 percent at an annual rate, and 3.3 excluding food and energy, each 'revised down 0.3 percentage point'. ^[9]

ADP's count of private payrolls, out the same morning, put September at 90,000 jobs, with August revised to 36,000; its chief economist, Nela Richardson, said 'job creation rebounded and pay growth remained solid'. The betting on the Fed moved with the two days. Reuters reported that before the data markets priced 'a roughly 51.5% chance' of a rise at the October meeting, 'down from 70% on Monday'; Yahoo Finance reported that after it the CME's FedWatch tool showed 35 percent. ^{[12, 10, 13]}

The record

The decision these numbers bear on is the statement of 16 September, which raised the target range 'by 1/4 percentage point to 3-3/4 to 4 percent' with the sentence 'Inflation remains elevated.' Two officials who spoke this week cited a higher number than the bureau now publishes. Governor Cook said on Monday that total inflation 'rose an estimated 3.8 percent in the 12 months leading into August' and core 'an estimated 3.4 percent'; Williams said 3.7 on Tuesday. The bureau's figures for August are 3.4 and 3.0, and for July the same. ^{[14, 15, 5, 7]}

Williams gave his reasons for where inflation is: tariffs, which he said 'are no longer adding to inflation in goods prices'; 'the ongoing conflict in the Middle East and severe capacity constraints in oil refining'; and an AI boom in which 'demand is winning' the race with supply. He said 'monetary policy cannot move ships or reopen pipelines and refineries', and that the risk to employment 'has receded' while 'the risk to achieving price stability has increased'. ^[5]

The mortgage is where the long end lands. The Mortgage Bankers Association's survey for the week to 25 September, as HousingWire reported it, put the 30-year contract rate at 7.3 percent, from 7.12, a sixth weekly rise and, in the words of its deputy chief economist Joel Kan, 'the highest rate since November 2023'; applications fell 6 percent. Mortgage News Daily reported that its daily index went from 7.50 to 7.58 percent on Tuesday, 'the highest since November 1st, 2023', on a day it noted oil prices dropped. Freddie Mac's weekly survey, 7.03 percent last Thursday, is next due on 1 October. ^{[16, 18, 17]}

Floating-rate credit was signed on the day of the record closes. Tesla's filing of 29 September describes $30.0 billion of bank facilities whose dollar borrowings 'accrue interest, at Tesla's election, at a variable rate based on either Term SOFR or an alternate base rate', plus a margin set by its credit rating; it had drawn nothing. The desk's story of the day reads that filing in full. ^[19]

Who it reaches

The same thirteen filers as chapters two and three, none of which has filed since: the builders, whose buyers meet the rates in the mortgage surveys above; the lenders, whose volume follows them; the banks, whose lending margin the curve sets; and the mortgage trusts, whose holdings are priced off it. Tuesday's table changed shape as well as level: the two-year came down and the thirty-year went up, so the gap between them widened from 0.64 of a point to 0.70. Tesla joins the list as a borrower on floating rates. This chapter prints no share price. ^{[1, 16, 17, 19]}

Where the sources disagree

On what happened to inflation. Fox Business wrote that compared with July 'headline PCE declined from 3.7% to 3.4%'; the bureau's own table says July is now 3.4, so the 12-month rate did not come down from July to August, it was restated for both months. Yahoo Finance's market page wrote that prices 'cooled more than expected'; the month's own increase, 0.3 percent, was the largest since May by the bureau's table. What came in under the forecasts was a rate measured a new way. ^{[11, 7, 13, 10]}

On the odds and the cause. Reuters put the chance of an October rise at about 51.5 percent before the data and 70 on Monday; Yahoo Finance's page gives 35 after the data, 'from 51% a day earlier'; TheStreet's report of Monday evening said traders had raised it to 70. They are one tool read at different hours. On Tuesday's selling at the long end, Mortgage News Daily wrote that rates 'have a lot more on their mind than oil these days'; Monday's reporting, read for chapter three, had tied the selling to Iran and oil. ^{[10, 13, 20, 18, 17]}

What settles it next

Wednesday's own table, which the Treasury publishes in the evening and which will show what the revision did to the curve. Freddie Mac's survey on Thursday 1 October. The employment report for September at 8:30 on Friday 2 October. The auctions of a three-year note on 6 October, a ten-year on the 7th and a thirty-year on the 8th, the first sales of those maturities since the rise. The Fed's meeting of 27 and 28 October, with the bureau's next release on income and prices due the morning after it ends, on 29 October. Chapter five opens on the first of these to move the table. ^{[17, 6, 1]}

Sources

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