Trump Eating Crow After Getting Less Than He Wanted from Iran War and the Federal Reserve
June 18, 2026
President Trump signed a memo of understanding with Iran to end the war with Iran, reopen the Strait of Hormuz and allow for a period of 60 days to address Iran’s nuclear program and hammer out remaining disagreements. While this signing is viewed as an important step toward reestablishing the supply of energy and other supply bottlenecks, assessments of the deal around the world are widely concluding that Iran by far attained the most meaningful concessions. For example, the original goals of the U.S. and Israel were mostly missed, U.S. relations with Israel, Europe and Gulf countries took an adverse turn, Regime change in Iran failed to happen.
For years, President Trump waged a multi-dimensional assault on the independence of the Federal Reserve in a broader effort to loosen monetary policy much more substantially. Jerome Powell, who was the object of much of the president’s wrath, is finally out as chairman, but his new appointment as Chairman, Kevin Warsh, kicked off his stewardship with very blunt language promising lower inflation soon. Financial markets absorbed the unexpectedly hawkish message and quickly adjusted upward the probability of an interest rate hike later this year.
Bad news for Mr. Trump isn’t necessarily a problem for the economy or the dollar. The U.S. currency extended recent strength overnight, climbing 0.7% vis-a-vis the Korean won, 0.5% against the Swiss franc, 0.4% versus sterling, 0.3% relative to the euro and peso, and 0.2% against the yen, loonie, and Turkish lira. U.S. stocks absorbed losses in the final hour of Wednesday trading but recouped ground in futures trading prior to today’s opening bell. Perceiving a more credible commitment to 2% or lower U.S. inflation, the 10-year Treasury yield fell four basis points overnight. The price of West Texas Intermediate oil is 2.3% lower, and silver has lost a further 5.3% of its value.
In a 24-hour period that brought many central bank interest rate announcements, the Fed’s message, even though devoid of an immediate interest rate change, was the most surprising and carried the most clout. Regarding the persistent overshoot of the 2% inflation target since 2021, Warsh promised, “we’ve missed for five years, and we’re going to fix that.” A much abbreviated formal statement ends with a promise (the Committee will deliver price stability) and doesn’t bother to spell out the other part of its dual mandate, which by alluding earlier to sufficient or solid growth in GDP, capital investment, productivity and jobs is already being met.
The federal funds target of 3.50-3.75% over the past half year will likely be raised one or two times in the second half of 2026, according to an updated dot-plot diagram and revised macroeconomic forecasts that include an upward revision of PCE inflation this year to 3.6% from 2.7% projected three months ago. Even in 2027, inflation is expected to average more than the targeted goal.
Among the slew of other central banks holding monetary policy reviews, those in Indonesia, the Philippines and the Czech Republic lifted their interest rates.
Bank Indonesia’s 25-basis point rate hike to 5.75% followed an unscheduled review just eight days earlier and an initial tightening done in May. The haste implied by this sequence of increases totaling a full percentage point has been motivated by inflation of 3.1% that exceeds the 2.5% target mid-point but even more so by the weak rupiah and depleted forex reserves after significant intervention to counter the currencies depreciation.
At Bangko Sentral ng Pilipinas, the policy rate has been increased by 25 basis points as well today to 4.75%. An initial move in April represented a trend reversal following a series of reductions from a peak of 6.5% maintained between October 2023 and August 2024 to 4.25% reached initially in February of this year. In justifying today’s rate hike, a released statement argues,
Inflationary pressures remain strong. Global oil and fertilizer prices remain elevated and continue to drive domestic fuel and food prices. Rising core inflation indicates broadening price pressures and second-round effects, including higher inflation expectations.
The Czech 2-week repo rate increase to 3.75% today from 3.50% that had prevailed for the past 13 months follows on the heels of a similarly-sized increase at the European Central Bank last week, represents that central bank’s first tightening since mid-2022 and “aims to keep headline inflation stabilized close to the 2% inflation target over the monetary policy horizon,” according to officials in their released statement. One of the Czech National Bank’s seven policymakers favored leaving the rate level at 3.50%.
Central banks in Taiwan, the U.K., Norway, and Switzerland chose to leave their interest rates as they were.
- The 2.0% Taiwanese discount rate has been at that nearly two-decade high of 2.0% since March 2024. Taiwanese CPI inflation has roughly tripled from 0.7% back in January to a 14-month high of 2.2% last month.
- Among the nine members on the Bank of England’s Monetary Policy Committee, the majority voted to leave the British Bank Rate unchanged at 3.75% and included Governor Bailey. Dissents in favor of a 25-basis point hike were cast by Megan Greene and the BOE’s chief economist, Huw Pill. For the majority, “Upside risks to energy prices had receded, although they remained. The higher interest rates facing households and businesses were already acting to reduce inflation over time and therefore a hold in Bank Rate at this meeting was appropriate.” Greene and Hua were less confident in the pace of the underlying disinflation pre-conflict. They were more concerned that households’ and firms’ greater attention to inflation outturns than in the past would lead to larger second-round effects for a given energy price profile.” The last rate change, a cut of 25 bps, occurred in December.
- It’s only been a month since the initial 25-basis point interest rate hike at the Bank of Norway. Norwegian inflation has climbed to 3.1% versus a target of 2.0%. Although officials decided not to follow May’s tightening with another so quickly, their statement signals that further restraint is likely: “Inflation is too high, and the rapid rise in business costs in recent years will contribute to keeping inflation elevated ahead. New information indicates that inflation pressures are slightly stronger than we had anticipated earlier. We expect that a somewhat tighter monetary policy stance will be needed to bring inflation down to target within a reasonable time horizon.”
- For over a half century, the Swiss National Bank has been the gold medalist for achieving very low and stable inflation, and the reward for that distinction has been a central bank interest rate of just zero percent since mid-2025. Collateral damages from previous experiences with a negative interest are a strong deterrent from cutting the interest rate even though officials in spite of elevated global energy costs are projecting CPI inflation to average just 0.7% this year and next followed by 0.7% in 2028. The curse of all this is the Swiss franc’s chronic overvaluation, which is aggravated by America’s erratic trade policies. The remedy is the central bank’s readiness to intervene directly in the market when the franc appreciates too far, and that threat was raised a gear in today’s latest statement: “If necessary, the SNB has an increased willingness to intervene in the foreign exchange market.”
- Ukraine’s central bank interest rate was kept steady at 15.0%, its level since January. However, “given signs of increasing underlying price pressures, the National Bank of Ukraine is ready to raise its key policy rate if necessary to keep inflation expectations in check and return inflation to a sustained downward trajectory toward its 5% target.” Last month’s CPI inflation reading was at 8.2%.
The Central Bank of Brazil’s Selic interest rate was cut another 25 basis points to 14.25%. That was the third such reduction since April and leaves the level will above inflation, which has accelerated from a low of 3.16% in mid-2023 to 4.72%. A cautious approach to lowering the rate level will continue.
On today’s menu of economic data releases, British labor market statistics highlighted a spike in jobless claims to a 22-month high, continuing low wage growth, and an unexpected dip in unemployment to match this year’s low of 4.9%.
U.S. jobless insurance claims of 226k were slightly lowr than in the first week of June, and the Philly Fed monthly manufacturing survey revealed a bounce-back in June.
Euroland’s seasonally adjusted current account surplus equaled EUR 15.7 billion in April, a tad wider than in March but well below the January-February average. The unadjusted surplus over the past dozen months equaled 1.7% of GDP, down from 2.3% in the previous twelve month period. Construction output in the euro area was 0.9% higher in April than a year earlier.
The Swiss trade surplus in January-May of CHF 19.4 billion was 23% narrower than a year earlier.
Portuguese producer price inflation jumped to a 39-month high in May of 5.1% from 3.8% in April and -3.5% in February.
Copyright 2026, Larry Greenberg. All rights reserved.
Tags: Bank of England, Bank of Norway, Central Bank of Brazil, Eurland current account, Federal Reserve Bank, National Bank of Ukraine, Swiss National Bank
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