Inflation

Critics argue that the administration’s arcade games prioritise entertainment over pressing issues like rising costs and foreign conflicts.

The White House’s unveiling of five arcade-style games on its website, each believed to be promoting a different policy of United States President Donald Trump’s agenda, has ignited backlash, with critics accusing the administration of prioritising entertainment over addressing rising living costs and the ongoing war on Iran.

Announced on Thursday, the games include “Build the Wall” where players run to capture little green figures before they reach a border wall; “Rio Run”, a Snake-style game in which players gather border crossers along a fence; “Supply Line”, in which players reject food items that fail to meet “Make America Healthy Again” standards; “Flappy Bill,” a Flappy Bird-style game in which a bald eagle carries legislation over the National Mall; and “Trump Savings Tycoon”, in which players catch flying cash and gold bars to “fill your kids’ Trump Accounts,” in reference to the administration’s child savings programme.

“Heating oil is near an all-time high but hey you can play Border Czar Tom Homan in a video game,” Senator Matt Lesser wrote on X.

Rights groups have also criticised the administration for the gaming website.

“Makes me sick. They’ve been playing games with people’s lives for years, now they’ve made a video game of what they’re doing,” Amerika Garcia Grewal, co-director of the Frontera Federation in Eagle Pass, Texas, told AFP news agency.

The game designers “have lost touch with what it means to be human and care for others”.

Adriana Jasso, programme coordinator for AMIGOS San Diego Community, who works at the border, said the arcade-style games showed a fundamental “lack of seriousness” from the administration.

“The cruelty, the extremity of the administration … is no longer surprising,” she said.

In recent months, Trump has faced mounting criticism over the economic toll of the war on Iran and his broader domestic agenda.

The conflict has kept the Strait of Hormuz closed for nearly six months, disrupting global supplies of oil and natural gas and fertiliser, and pushing US inflation above the Federal Reserve’s 2-percent target, according to reporting by Texas Public Radio.

Trump has also faced criticism over tariff policies that the Supreme Court partly struck down earlier this year, along with cuts to food assistance programmes and the expiration of Affordable Care Act tax credits, all of which economists say have compounded the squeeze on household budgets.

The White House, meanwhile, appeared unfazed, posting “CAN’T STOP WINNING” on X alongside a link to the games.

Borrowing costs across some of Europe’s biggest economies have surged to their highest levels in more than 15 years, as a renewed sell-off in global bond markets gathers pace.

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The global bond rout pushed Germany’s benchmark borrowing costs to a 15-year high on Tuesday, with France, Italy and the Netherlands all seeing similarly steep rises.

Germany’s 10-year Bund climbed above 3.36% on Tuesday, according to Trading Economics. Later, the yield went down a bit and traded at around 3.34%.

Bond yields move inversely to prices. When investors sell bonds, prices fall, and because a bond’s fixed interest payment becomes worth more relative to that lower price, the effective yield rises.

In short — the more bonds get sold, the more it costs governments to borrow.

Sovereign debt came under renewed pressure as rising oil prices and increasingly hawkish signals from major central banks reinforced bets that interest rates will stay higher for longer.

The yield on Germany’s 30-year Bund surged above 3.84%, also its highest level since 2011. The French 10-year OAT yield rose to its highest level since November 2008, trading slightly above 4.215% at around 10.45 CEST on Tuesday. The equivalent Italian yield was trading slightly lower at 4.188 at the same time.

At the same time, the Dutch 10-year government bond yield increased to 3.43%, its highest level since May 2011. Spain’s 10-year yield climbed above 3.80%, its highest level since November 2023.

Investors are concerned that rising energy prices will fuel inflation around the world, potentially prompting interest-rate increases by central banks in the US, Japan and the eurozone, among others.

These concerns were reinforced in the eurozone on Tuesday morning, as the latest flash inflation data from Eurostat showed that energy prices were 14.3% higher than a year earlier. This helped push eurozone inflation to 3.3% in August, up from 2.9% in July. This is significantly above the ECB’s 2% target.

The central bank is due to hold its next monetary policy meeting next week, and most investors are betting on a 25-basis-point rate hike.

Leo Barincou, senior economist at Oxford Economics, said: “With inflation still accelerating, the ECB is all but certain to hike at next week’s meeting, in line with our expectations.”

Looking at the largest European economies, analysts say Germany’s Bund has moved largely in line with global benchmarks, while France faces an additional risk premium because of its political and fiscal outlook.

French 10-year borrowing costs have exceeded Italy’s for much of the summer, as France increasingly replaces Italy as the main focus of European debt concerns.

According to the IMF, France’s gross government debt is projected to reach 118.4% of GDP this year and 120.5% in 2027. France currently has the third-highest debt-to-GDP ratio in the EU, after Greece and Italy.

The Banque de France expects the budget deficit to reach 5.2% of GDP this year. Difficult budget negotiations ahead of the 2027 presidential election have raised doubts about the government’s ability to reverse this trend.

Robert Timper, BCA’s chief fixed-income strategist, previously told Euronews Business: “We have held the view for some time that France is the country in the euro area with the most unsustainable fiscal outlook, and its borrowing cost should reflect that.”

“To get back to a sustainable fiscal path, France needs to do substantial reforms, which will be unpopular as they will curtail welfare spending,” Timper said. “A large political majority is therefore necessary for such reforms, or a bond market riot will force reforms.”

Global bond sell-off

Expectations of persistently high inflation and rising borrowing costs also pushed the yield on 10-year US Treasuries to its highest level since January 2025. The yield on the 10-year Treasury was trading at around 4.78% on Tuesday.

In the US, higher energy prices have added to already stubborn inflation, which remains well above the Federal Reserve’s 2% target. Inflation has weighed on household spending and consumer confidence, complicating the Fed’s decisions on interest rates.

According to Bloomberg, traders raised the probability of a September US rate hike to about 70%, extending a repricing that began last week when Federal Reserve Chair Kevin Warsh doubled down on a pledge to tame inflation.

The sell-off also spread to Asia, where Japan’s benchmark 10-year government bond yield reached 3.00% for the first time since 1996.

Government bonds have traditionally been seen as safe-haven assets during periods of uncertainty.

That role is being tested as investors become increasingly concerned that global conflicts and higher energy prices could produce a prolonged period of stagflation — a combination of high inflation and weak or zero economic growth.

Canada’s economy has rebounded sharply in the second quarter after six months of virtually no growth, aided by a strong jump in exports and solid domestic demand, though a new round of tariffs from the United States brings renewed uncertainty.

The economy grew at an annualised rate of 3.3 percent in the second quarter, the fastest rate since 2023, after a revised 0.3 percent increase in the first quarter, Statistics Canada said on Friday.

The upward revision to first-quarter growth means Canada was not in a technical recession, usually defined as two straight quarters of contraction.

Healthy domestic demand, led by consumer spending and business investment, signals the economy is slowly brushing off the impacts of more than 18 months of US import tariffs that upended North American supply chains and increased costs.

Renewed tariff dispute

A strong domestic consumption and expenditure pattern puts Canada on a firm footing to withstand a new 50 percent US import tariff that President Donald Trump imposed this week on $20bn of Canadian exports. Canada retaliated with its own countermeasures on US imports.

“It seems like households and businesses were beginning to find ways of navigating the trade-related uncertainty before the latest round of tariffs,” Royce Mendes, managing director and head of macro strategy at Desjardins, wrote in a note.

“While it helps that the economy was on stronger footing heading into August, the fresh wave of protectionism injects a significant amount of uncertainty into the outlook,” Mendes said.

Michael Davenport, senior Canada economist at Oxford Economics, said in a note to Al Jazeera that while the gross domestic product (GDP) growth was along expected lines, “the economy is set to slow in the coming quarters amid escalating US-Canada trade policy uncertainty, new bilateral tariffs, and a shrinking population”.

The Canadian dollar weakened slightly after the GDP data, with the loonie trading down 0.01 percent at 72.17 US cents.

On a quarterly basis, GDP grew 0.8 percent for the period ended June, from an upwardly revised 0.1 percent in the previous quarter.

Second-quarter annualised growth was higher than the Bank of Canada’s July forecast of 2.5 percent growth.

Higher exports were one of the main contributing factors for the second-quarter growth, with outbound shipments growing 3.6 percent, the biggest increase in over three years, Statistics Canada (StatsCan) said.

Stronger household spending

Final domestic demand, the sum of all consumption and capital spending and a crucial metric to assess domestic health, rebounded to 1 percent in the second quarter, from a minor contraction in the first quarter.

Domestic demand has been muted for several quarters as consumers and businesses remain cautious while Canada navigates its trade war with the US.

But household final consumption expenditure, the main indicator of consumer spending, rose 0.8 percent, its highest level in three quarters, highlighting stronger household spending. This was mainly driven by higher wages and government benefits, economists said.

Business investment, or business gross fixed capital formation, sprang to a solid 2.3 percent growth in the second quarter from a contraction of 1.3 percent, the first time in the last year and a half that business investment has expanded.

That growth was led by investment in both residential and non-residential structures, machinery and equipment, StatsCan said.

However, the general gross fixed capital formation, essentially government expenditure for creating assets, continued to decline with a second-quarter contraction of 2.9 percent, after shrinking 2.6 percent in the previous quarter.

On a month-to-month basis, GDP for June grew 0.3 percent against a forecast of 0.2 percent, and an advance indicator showed that the economy was largely flat in July, the statistics agency said.

Marking his 100th day in the job, Federal Reserve Chair Kevin Warsh told the Kansas City Fed’s symposium in Wyoming that the US economy has strengthened rather than weakened under recent shocks, that the labour market is consistent with full employment, and that inflation remains the central bank’s dominant concern.

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Warsh declined to say what he would do next month, but he removed most of the arguments against acting and bolstered the ones in favour of a rate hike.

“For my part, today I am impressed by the overall performance of the economy, which appears to have strengthened,” Warsh stated.

“One indicator of strength is how well an economy holds up to shocks. On that score, both Main Street and Wall Street have been remarkably resilient,” he added.

On inflation, Warsh noted that the PCE index stood at 3.7% over twelve months and 4.1% over six, and 54% of the basket’s components rose by more than 3% over the past year, against 32% in the two decades before the pandemic.

Summer readings that beat expectations “do not tell me that underlying trends have meaningfully improved,” Warsh stated.

The Federal Reserve Chair’s conclusion was blunt: “the Fed’s predominant focus right now should be on prices.”

The standard set was equally direct. “We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do,” Warsh declared.

That assessment matters because it eliminates the case for supporting growth with further stimulus and potentially opens the door for restrictive measures as markets moved in response.

At the time of writing, the 10-year Treasury yield has fallen 0.5% from its Friday high to 4.67% and the 30-year dropped around 0.9% to 5.16%, while the dollar index rose 0.4% from the intraday low to roughly 99.4 points.

Traders raised the implied probability of a 0.25% hike at the 15 and 16 September Fed meeting to 55%, from around 35% before Warsh’s speech.

Performance of the US economy

Warsh opened his speech with what he called a hinge point in history, arguing that artificial intelligence has advanced faster than even its advocates predicted.

Annualised AI token sales at the two leading labs alone exceed $100 billion, he said, up more than 500% in a year.

AI is “a new variable, potentially a new factor of production,” raising questions the Fed cannot answer yet such as whether it will lift productivity and when, whether it complements or replaces labour, and where the returns will ultimately land.

A new Federal Reserve task force on productivity and jobs is examining it, though he stressed its recommendations will have no bearing on current policy decisions.

Warsh then listed extensive evidence for his positive outlook on the US economy.

Business investment in equipment and intangibles growing at around 9%, its fastest since 2021, with more than half of this year’s capital expenditure growth attributable to the AI buildout.

S&P 500 profits went up more than 20% over the year, credit spreads are near historic lows and banks are easing lending standards. Housing and agriculture are strained, Warsh acknowledged, but on balance he “would be hard pressed to describe broad financial conditions as restrictive.”

Unemployment at 4.1% is low by historical standards, with jobless claims near their lowest in decades, leaving inflation as the outlier.

No forward guidance

The Federal Reserve Chair devoted a substantial section to defending his refusal to signal future moves, a stance that has drawn criticism since he took office in May.

Forward guidance was adopted during the 2008 crisis by colleagues including himself, he said, and was essential then, but “the practice has overstayed its welcome” and now “risks creating ambiguity in the name of clarity.”

Warsh warned of a hall-of-mirrors problem in which markets read the Fed while the Fed reads markets, leaving both blind to new developments.

“We should not indulge a regime in which market participants are looking primarily to the Fed for their next trade,” he said, adding that the costs of such errors fall not on “financial high-fliers” but on households facing high inflation or insecure jobs.

Warsh also rejected calls to publish an explicit reaction function, arguing economic knowledge does not permit a mechanical rule.

Instead he set out six principles: interrogate incoming data rather than trust stale figures, accept that judging supply against demand is imprecise; treat the 2% PCE target as firm and fixed; pursue both mandates without treating them as a trade-off; rely on short-term rates rather than unconventional tools; and remember that money itself matters.

“I stand here today committed to a discipline, not to a decision,” Warsh said in closing.

The decision comes on 16 September at the next Fed meeting.

Caracas, August 26, 2026 (venezuelanalysis.com) – Venezuelan opposition lawmaker Antonio Ecarri has proposed dollarizing Venezuela’s economy and abolishing the bolívar, the country’s official currency, as a way to “stop devaluation” and “protect citizens’ purchasing power.”

Ecarri, a National Assembly Deputy from Alianza del Lápiz, has hired US economist Steve Hanke as an advisor for his plan to change the national currency.

“We are working on a serious dollarization proposal to put the brakes on the infernal devaluation that is destroying people’s wages. Enough of bureaucracy financing public spending by confiscating the private property and labor of Venezuelans,” Ecarri said.

Hanke, a Johns Hopkins University academic who served in the Reagan administration, has advised countries such as Ecuador and Zimbabwe on similar initiatives. In an article for business magazine Fortune, he confirmed that he has already drafted “a bill for the Venezuelan parliament.”

According to the US economist, the transition would begin with the establishment of a fixed USD-bolívar exchange rate before converting bolívar-denominated accounts to US dollars. The Venezuelan Central Bank (BCV) would retain administrative functions but lose the ability to issue money or set interest rates.

Hanke previously revealed that he has held meetings with US Treasury and White House officials to discuss an international strategy aimed at strengthening the US currency through dollarization of foreign countries, currency boards, and other instruments.

Ecarri’s proposal drew significant criticism, with Venezuelan National Assembly President Jorge Rodríguez announcing “an investigation process to establish the offenses committed” by the opposition lawmaker. Ecarri was also removed from his position as chairman of the Venezuela-US Parliamentary Friendship Group, a post he had held for just two months.

According to a published statement, the opposition deputy allegedly violated the legislature’s internal procedures as well as the constitutional provision establishing that “the monetary unit of the Bolivarian Republic of Venezuela is the bolívar” and that the Central Bank “is the public entity that, exclusively and mandatorily, exercises monetary policy.”

Rodríguez also described the proposal during a parliamentary session as “absurd and outrageous.” Ecarri, however, defended his stance and decision to hire Hanke, whom he called “an authority in the field and a personal adviser of mine for some time.”

The opposition lawmaker argues that Venezuela is “at a key moment” to debate the adoption of a different currency. 

“The country is already de facto dollarized, but those who continue to receive their wages in bolívars that lose value every day are our teachers, nurses, workers, and pensioners,” he stressed. “The government itself has just approved a law allowing rents to be paid in foreign currency.”

Ecarri claimed that growing oil revenues would supply Venezuela with enough foreign currency to adopt the dollarization plan, which he argued “should be accompanied by a Macroeconomic Stabilization Fund to protect the value of the currency against potential external shocks in the United States.”

Since 2018, the Venezuelan government has tolerated the circulation of US dollars amid efforts to control inflation. Though the bolívar remains the official currency, businesses and retailers establish cost structures and prices using US dollars. Venezuelan authorities have also fixed monthly bonus payments, which constitute virtually the entire income for workers and pensioners, in dollars, which are then paid in bolívars using the exchange rate established daily by the BCV.

The Central Bank has continually devalued the bolívar, with the USD-bolívar exchange rate growing by more than 150 percent since the beginning of 2026. The currency depreciation is a key driver of inflation. Prices rose by 19.9 percent in July, and accumulated 12-month inflation presently stands at 576 percent.

Financial authorities have likewise been unable to control a parallel, speculation-driven exchange rate which currently stands 15-20 percent above the official one.

Despite the persistent devaluation-inflation issues, formal dollarization is opposed by most Venezuelan policy analysts, including government critics. Economist Asdrúbal Oliveros warned that dollarization would be an effective mechanism for drastically reducing inflation but “is not the best solution,” since it would be a “nearly irreversible” decision that would limit the country’s monetary policy options.

Right-wing economist José Guerra likewise considers dollarization “a straitjacket” for an oil-producing country. “Without a central bank issuing currency, an external shock will cause deflation, an inability to pay salaries and finance public spending, as happens in Ecuador. It also creates a high dependence on the US and is a one-way path,” he said.

Rodrigo Cabezas, former finance minister under President Hugo Chávez, similarly expressed his “complete opposition” to dollarization, stating that it is “unreasonable” for a country to surrender essential economic tools, losing control over foreign exchange policies and interest rates.

For his part, economist and former United Socialist Party (PSUV) legislator Tony Boza contended that Washington wants to push dollarization in Latin America to “stave off its economic downfall.” Boza went on to criticize the acting Delcy Rodríguez government and the National Assembly for subordinating economic policies and the country’s national resources to US and foreign capital interests.

Edited by Ricardo Vaz in Caracas.

Walmart sales are slumping as US consumer spending pulls back, with the economic impact of tariffs and the United States’ tensions with Iran weighing on consumers, the big-box retailer’s most recent earnings report shows.

US same-store sales rose 2.6 percent in the second quarter, according to the company’s earnings released on Thursday, falling short of the 3.8 percent forecast by analysts at LSEG. That marked the slowest quarterly increase in six years.

The Bentonville, Arkansas-based retailer said heightened petrol prices are to blame for the slowdown in spending.

“When fuel prices increase and get above $4, perhaps there’s a psychological impact to that … consumers are making trade-offs,” CFO John David Rainey said on a call with analysts on Thursday.

Prices are continuing to jump. The average price for a gallon (3.78 litres) of petrol rose to $4.10 on Thursday, up from $4.07 a week ago, according to the American Automobile Association, which tracks daily petrol prices. By comparison, the average price was $2.98 when the US and Israel first struck Iran.

The big-box retailer also said it expected $2bn in incremental fuel-related costs above its original guidance.

Sales dropped in Walmart’s US pharmacy business and also dipped elsewhere. Overall, quarterly revenue rose 3.4 percent, the slowest pace since the first quarter of fiscal 2023.

Consumers are spending more in the checkout line — 1.1 percent higher than the previous quarter — but it is still well below the 3.1 percent jump this time last year.

That comes as consumer inflation ticked up last month by 0.1 percent from the month prior and 3.4 percent from this time last year, according to the US Labor Department’s Bureau of Labor Statistics (BLS).

The price of fresh fruit jumped 2.2 percent from a month ago, butter by 0.8 percent, and fresh fish by 1 percent, according to the BLS report.

This as overall retail sales dipped in July, dropping 0.6 percent, marking the biggest decrease since May 2025, according to the US Commerce Department data released last week.

Walmart also announced price cuts on Wednesday on 11,000 items, to be fuelled in part by the $2.9bn in tariff refunds it has received – a one-time boon – and a strategy also being deployed by rivals including Target.

Walmart said, however, that price changes took effect in July, so the effects might be more apparent in the company’s next earnings report.

“You don’t necessarily expect to have that offsetting benefit to the lower prices in the immediate period,” Rainey said.

However, fewer consumers are venturing into brick-and-mortar stores, with foot traffic increasing by 1.5 percent for the quarter, a drop from 3 percent in the previous quarter. However, Walmart’s e-commerce sales are on the upswing, with sales jumping 24 percent in the US.

As a result, Walmart upgraded its forecast for net sales growth, from 3.5–4.5 percent to 4–5 percent.

But that is limited because in-store sales are still the company’s premier offering.

“The bread and butter of the company is still in-store and in-person shopping,” Melius Research analyst Jacob Aiken-Phillips told the Reuters News Agency.

Mixed big-box earnings

Other big-box retailers also reported earnings in the last couple of days, with a pullback in consumer spending being an undertone. TJX, the parent company of TJ Maxx and Marshalls, reported sales growth of 1 percent for the quarter, a slowdown from 6 percent the quarter before.

“Our fear is that it relates to lower ticket [less purchases per shopping trip] given wider signs of consumer weakness and price increases over the last year-and-a-half,” William Blair analyst Dylan Carden told Reuters.

That comes alongside earnings from Target, one of Walmart’s closest competitors. On Wednesday, the Minneapolis, Minnesota-based big-box retailer reported net sales jumping 5.3 percent for the quarter compared to this time last year, at $26.5bn.

That was driven by a 3.6 percent rise in in-store traffic. The company has also cut prices over the last year on more than 10,000 items and received a $1bn tariff refund.

On Wall Street, Walmart is taking a hit on the heels of its earnings report, with shares down by 9.6 percent since the market opened. Other big-box retailers are lower, but not showing nearly as stark a drop. TJX stock was down 1.7 percent, and Target was down by 0.1 percent.

Published on 18/08/2026 – 12:47 GMT+2•Updated
13:04

Government borrowing costs are surging on both sides of the Atlantic.

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Long-term bond yields across Europe’s biggest economies hit multi-year highs on Tuesday, while the yield on 30-year US Treasuries rose to its highest level in nearly two decades.

The sell-off came as hopes of a swift resolution to the Iran conflict faded, pushing oil prices higher and renewing concerns about persistent inflation. International benchmark Brent crude traded at nearly $91 a barrel on Tuesday morning amid heightened tensions in the Middle East.

“The breakdown in US-Iran peace talks has increased the risk that energy prices remain elevated for the rest of the year, which could keep inflation higher than expected and increase the chance of central banks raising rates,” Richard Carter, head of fixed interest research at Quilter Cheviot, told Euronews Business.

Investors are increasingly betting on tighter monetary policy in the eurozone, with the ECB deposit rate expected to reach 2.76% by March 2027, up from 2.25% currently.

According to Trading Economics, investors see a 90% probability of a September rate hike by the European Central Bank (ECB).

At the same time, in the US, the 30-year Treasury yield reached 5.33%, a level not seen since 2007. In the UK, the 30-year gilt traded at 5.85% — its highest level since May 2026.

As government bonds came under renewed selling pressure globally, France’s 10-year bond yield rose to 4.10% on Tuesday morning, its highest level since June 2009.

Germany’s 10-year Bund yield, the benchmark for the eurozone, climbed above 3.25%, reaching its highest level since March 2011.

France’s 30-year bond yield reached its highest level since 2008, amid a global bond sell-off and growing concern about the country’s 2027 budget negotiations and next year’s presidential election. Germany’s 30-year bond yield rose to 3.78%, its highest level in 15 years.

Rising long-dated bond yields are not driven solely by expectations of higher interest rates and inflation fears.

“Investors are concerned about the scale of borrowing in major economies including the UK, France and Japan,” Carter continued, adding that “significant volumes of AI-related bond issuance have also added to supply, creating further pressure on prices and pushing yields higher.

Higher borrowing costs put pressure on economies and raise financing costs across a range of investments.

As government debt offices constantly raise money through bond markets, the effect of the jump in yields will gradually feed into their borrowing costs as they refinance maturing debt.

Italy is expected to refinance maturing debt equivalent to 17% of GDP in 2026, according to S&P Global Ratings, compared with 12% for France and 7% each for Germany and the UK.

For now, bond markets are likely to remain sensitive to developments in both geopolitics and economic data,” Carter said.

He added that bonds remain attractive to investors because yields are historically high and comfortably exceed inflation, offering a positive return after price rises are taken into account.

On hearing that new Prime Minister Andy Burnham will be embarking on a monthlong “cost of living” tour across the United Kingdom, one user of the social media chat platform Reddit commented: “Housing is too expensive, energy is too expensive, food is too expensive etc. There you go, Andy, I’ve saved you some fuel (very expensive).”

Like much of the world, the UK is grappling with the rising cost of living. The Bank of England expects inflation to climb further in the second half of the year as the fallout from the United States-Israel war on Iran pushes up energy prices and household bills.

How high is inflation in the UK? Who is hardest hit? And how does it compare with other countries?

How high is inflation in the UK?

The annual rate of inflation in June was 2.8 percent, down from 3 percent in May. That means prices are still rising, but they are going up a bit more slowly than they were earlier in the year. In practical terms, if something cost 100 pounds (about $135) in June last year, that same item now costs 102.80 pounds ($138.65).

Before the US and Israel attacked Iran on February 28, the Bank of England had forecast that inflation as measured by the Consumer Prices Index (CPI) would fall from 3.4 percent in 2025 to 2.3 percent in 2026. Instead, inflation was again 3.4 percent in March this year, largely driven by higher fuel and heating costs.

Petrol and diesel up more than 20 percent

The closure of the Strait of Hormuz, a route for about one-fifth of the world’s oil and liquefied natural gas (LNG) supplies, has pushed up the cost of petrol, transport, food and other goods.

Petrol prices in the UK have hit a three-and-a-half- year high. According to data from the RAC Foundation, the price of petrol and diesel rose by 22 percent and 27 percent, respectively, between February 25 and August 11.

The average price of a litre (about a quarter of a gallon) of petrol increased from 1.32 pounds ($1.78) to 1.61 pounds ($2.17) while diesel rose from 1.42 pounds ($1.92) to 1.81 pounds ($2.44) per litre.

Who is being hardest hit?

Not every household feels inflation in the same way. For the average UK household, about 677 pounds ($914) is spent each week on goods and services with some of the biggest costs being housing, fuel and power, transport, food and recreation.

The impact is much greater for households on lower incomes. The Office for National Statistics (ONS) found that the poorest 20 percent of households spent an average of 407 pounds ($549) a week compared with 1,084 pounds ($1,462) for the richest 20 percent of households. Proportionally, the poorer households will feel the rise in prices more keenly.

That’s because the difference is particularly important when prices are rising. Someone spending a larger portion of their income on rent, energy, food and transport has far less of a cushion to absorb any increase in those costs.

According to the Joseph Rowntree Foundation, a charity that conducts and funds research aimed at fighting poverty in the UK, the cost of living crisis is widespread with 7.4 million low-income families unable to afford essential items this year – the highest since 2021 when its cost-of-living tracker began.

Is the UK worse off than other Western countries?

The UK’s 2.8 percent inflation rate in June puts it in the middle of the other Group of Seven  advanced-industrial democracies: Canada, France, Germany, Italy, Japan and the US.

The US has the highest inflation rate at 3.5 percent, followed by Italy (3 percent), Canada (2.8 percent), the UK (2.8 percent), Germany (2.3 percent), France (1.8 percent) and Japan (1.7 percent).

Countries have different exposures to inflation through energy prices, wage pressures and government policies. For the UK, inflation is primarily being driven by the energy triggered by conflict in the Middle East; services inflation, which in June was 3.6 percent, driven by higher costs at restaurants and hotels; and slowing wage growth.

Wages barely keeping up

For Britons, the weekly food shop is still more expensive than it was a year ago, but the latest figures show that food price inflation has slowed. This doesn’t mean prices are falling, of course – just not rising so quickly.

According to the ONS, food and nonalcoholic drink prices were 1.7 percent higher in June than a year earlier, down from 2.2 percent higher in May.

There could be more pressure ahead as the Bank of England says food prices are likely to be affected by higher energy costs affecting the production and transport costs of food. It predicts that food inflation will rise to nearly 3.5 percent by December while supermarkets have said they expect food inflation of 4 to 5 percent by the end of the year.

Weekly regular real earnings, which measure workers’ standard pay adjusted for inflation, have also dipped in recent months, from about 0.4 percent at the start of the year to 0.1 percent after the Iran war began, again making it harder for people to afford price rises.

Published on
12/08/2026 – 8:34 GMT+2

Oil prices climbed and world stocks were mixed on Wednesday, with Asian shares mostly higher even as Wall Street slipped further from last week’s record highs, as investors awaited a crucial US inflation reading and watched for any breakthrough in the stalled Iran war talks.

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The price of a barrel of Brent crude, the international benchmark, was up 0.9% at $89.67 early on Wednesday. US benchmark crude picked up 0.9% to $83.98.

Gold edged up 0.8% to $4,400.44 an ounce, while silver gained 1% to $65.30 an ounce.

Iran has rejected a comment by US President Donald Trump suggesting that, since Tehran is seeking compensation as part of any talks to end the war, Washington would demand the same.

The United States and Israel attacked Iran in late February, a strike that led to the closure of the Strait of Hormuz and kept much of the world’s oil pent up in the Middle East. Last month alone, Brent’s price swung between $72 and $102 a barrel.

Meanwhile, an attack by Iran-backed Houthi rebels on a vessel in the Bab el-Mandeb strait, off Yemen’s southern tip, has raised concerns that the violence could reignite civil war and further threaten regional shipping routes.

Higher oil prices worsen inflation, and they have pushed the average cost of a gallon of regular petrol in the US to $4.01, according to AAA — up from less than $3.14 a year ago.

That has Wall Street’s attention fixed on Wednesday, when the US government releases its latest monthly inflation reading. Economists expect it to show inflation slipped to 3.4% in July from 3.5% in June.

On Tuesday, the S&P 500 fell 0.3% for a second modest drop since setting its all-time high on Friday. The Dow Jones Industrial Average dipped 184 points, or 0.3%, and the Nasdaq Composite sank 0.6%.

Cooler inflation could ease pressure on the Federal Reserve to raise interest rates to tamp down price increases.

Higher rates could curb inflation, but they would also drag on the wider US economy by making it more expensive for households and businesses to borrow, while undercutting prices for stocks and other investments.

Treasury yields have jumped since the war with Iran began, driven by higher oil prices and inflation worries, sending long-term US mortgage rates to their highest levels in a year.

Tokyo’s Nikkei 225 gained 0.6% to 67,334.94.

In South Korea, the Kospi jumped more than 4% to 6,597.90 on renewed buying of computer chipmakers. Samsung Electronics gained 7.7% and memory chipmaker SK Hynix rose 7.1%.

Taiwan’s Taiex advanced 0.8%.

The Shanghai Composite index added 0.3% to 3,946.51, while Hong Kong’s Hang Seng slipped 1.2% to 25,352.13.

In Australia, the S&P/ASX 200 lost 0.6% to 9,197.00.

In other early Wednesday dealings, the dollar rose to 159.41 yen from 159.30 yen. The euro slipped to $1.1535 from $1.1544.

Additional sources • AP

The US president has clashed with Federal Reserve members over his bid to rapidly slash interest rates despite inflation.

The White House has revived its efforts to remove Lisa Cook, the first Black woman to serve as a governor at the Federal Reserve, the United States’ central bank.

On Friday, media reports emerged that the administration of President Donald Trump had sent Cook a letter threatening her position at the Federal Reserve.

“You are hereby provided notice that the President is considering removing you from your position,” the letter read.

Signed by White House Deputy Chief of Staff Dan Scavino, the letter gave Cook a deadline of three weeks to respond to unproven allegations that she had committed mortgage fraud.

It also warned that the crime she was accused of was punishable by up to 30 years in prison. Her conduct, the letter added, constituted negligence that calls into question her trustworthiness as a Federal Reserve governor.

Trump first unveiled the claims against Cook in August 2025, in a push to fire her from her role.

No other president since the central bank’s founding in 1913 has sought to oust a Federal Reserve governor.

The central bank has historically been insulated from political pressure, and under the law, Federal Reserve governors can only be removed by the president “for cause”. A full term runs 14 years.

Such laws aim is to shield the central bank from making economic decisions based on political pressures.

But Trump has undertaken an aggressive campaign to slash interest rates, which are elevated as a means of combatting inflation.

He has also sought to rid the federal government of appointees aligned with his Democratic predecessors. Cook was nominated in 2022 under President Democrat Joe Biden, Trump’s two-time election rival.

Trump’s claims against Cook centre on the idea that she listed two homes as her primary residence: one in Georgia and the other in Michigan. That could have made her eligible for favourable mortgage rates.

But there is no conclusive evidence so far that Cook sought to deceive lenders, making a successful fraud prosecution unlikely.

In June, a US Supreme Court ruling also blocked Trump’s attempt to fire her, though it did clear the way for the president to fire the heads of other independent agencies.

The letter sent to Cook this week was dated August 5. That same day, Cook spoke at an economic luncheon in Alaska, saying inflation is “too high” and indicating that she is “prepared to act” by raising interest rates, a position shared by others at the Federal Reserve.

Trump has long sparred with the Federal Reserve over interest rates, repeatedly threatening to fire former Federal Reserve Chair Jerome Powell for refusing to bow to his demands.

Kevin Warsh, a Trump appointee, took over Powell’s position as chair in May. He has yet to deliver Trump’s wished-for rate cuts, amid stubborn inflation.

“We should have the lowest interest rate in the world,” Trump said after last week’s decision by the Federal Reserve to hold interest rates steady for the fifth consecutive time.

In a statement, Cook’s legal team said “there is no valid cause” for removing her from her position.

“As we did before, we will challenge this latest pretext and preserve her position and the historic role of the Fed,” lawyer Abbe D Lowell said.

Japan and the United States have confirmed a rare, coordinated yen-buying intervention to halt the Japanese currency’s slide to 40-year lows, with Tokyo signalling it is willing to take further action if needed.

The Japanese Ministry of Finance confirmed the joint intervention after a statement by US President Donald Trump on Sunday announced that Washington was helping to prop up the yen as a sign of friendship and to support the global economy.

“They have a weakening yen, and they wanted a little bit of help. And we’re always there for Japan,” Trump said in response to a reporter’s query about why the US is helping to support the currency.

The yen leapt after the announcement, leaving traders on high alert for further intervention from authorities. The Japanese currency gained as much as 1.4 percent to hit a nearly three-month high of 155.20 per US dollar, compounding a 3.8 percent surge over the previous two sessions. The yen also advanced broadly against other major currencies, including the euro and sterling.

The latest bout of aggressive yen-buying heavily pressured the US dollar. In early Asian trading on Monday, the euro climbed to a 1.5-month high of $1.1559, while sterling hovered near a two-week top at $1.3476.

However, the rapid appreciation of the currency immediately weighed on the equity market. The Nikkei share average tumbled, reversing course from the one-week high it had achieved in the previous session.

Analysts say the intervention underscores both countries’ resolve to prevent global spillovers from a sell-off in the yen and Japanese government bonds, including by adding pressure on already rising US Treasury yields.

Japan has been struggling to curb a relentless drop in its currency that has pushed up import prices and stoked broader inflation, hitting household wallets and Prime Minister Sanae Takaichi’s approval ratings.

In its statement, Japan’s Finance Ministry said Friday’s yen-buying intervention with the US Treasury Department “countered excessive volatility and disorderly movements in the Japanese yen in recent months”.

“The Japanese Ministry of Finance remains attentive and in close communication with our counterparts at the U.S. Treasury,” it added. “We will not hesitate to conduct further joint intervention.”

The joint intervention is the first since a 2011 coordinated action to weaken the yen after the devastating earthquake in eastern Japan.

Tokyo may have sold as much as $58.97bn to buy yen when it intervened in New York markets on Thursday, Bank of Japan data indicated, before Friday’s confirmed joint intervention with Washington.

US Treasury Secretary Scott Bessent also confirmed Friday’s effort, noting on Sunday that Washington “will not hesitate to participate in further joint intervention”.

“We strongly support Japan’s decisive market and monetary steps to correct the substantial undervaluation of the yen,” Bessent said in a separate statement on X, repeating his calls for further interest rate hikes by the Bank of Japan.

In line with Bessent’s repeated calls for higher Japanese interest rates, the Bank of Japan on Friday offered its most explicit signal to date of an early rate hike, even as it kept monetary policy steady.

In a sign of broader policy coordination, South Korea also stepped in to buy its won currency on Thursday.

Japan intervened in April and May, buying yen, but the move triggered only a brief rebound. The Bank of Japan’s June rate hike to a 31-year high of 1 percent also gave the struggling currency little lasting boost.

California’s statewide minimum wage is set to rise next year.

Starting on Jan. 1, 2027, the statewide minimum wage will rise to $17.40 an hour, an increase Gov. Gavin Newsom boasted about on Friday.

Newsom — who has been eyeing a 2028 presidential run — said in a statement that California’s fiscal policies helped turn the state into “one of the strongest economies in the world” while the Trump administration and the Republican-led Congress fail to address “everyday cost pressures for working families.” The federal minimum wage has remained at $7.25 per hour since 2009.

“For years, Donald Trump and Republicans have blocked efforts to raise the federal minimum wage while handing tax breaks to billionaires and big corporations,” Newsom said. “California has chosen a different path — one that rewards work, grows the economy, and puts working families first.”

Not everyone agreed. Republican gubernatorial candidate Steve Hilton took to social media on Friday to decry the minimum wage increase as an “attack on workers” that will “crush small businesses.”

The current minimum wage in California for all employers is $16.90 an hour, though some workers must be paid more to comply with city and county rules and other state laws.

California’s minimum wage automatically increases each year to keep pace with inflation. The current system was established in 2016, when then-Gov. Jerry Brown signed into law a first-in-the-nation plan to gradually boost the state’s hourly minimum wage to $15 an hour, then adjust the wage annually based on inflation starting in 2024.

“This is about economic justice, it’s about people,” Brown said during the bill signing.

The specific amount of the minimum wage increase is tied to inflation — as measured by the federal consumer price index — and capped at 3.5%, according to state law. The state director of finance is responsible for calculating the adjusted minimum wage on or before Aug. 1 each year.

California has the highest minimum wage out of all 50 states, according to the governor’s office. (Only Washington, D.C.’s, minimum wage ranks higher, at $18.40.)

The state in 2024 raised minimum wage for fast-food workers to $20 an hour. The fast-food wage requirement applies to chains with more than 60 locations nationwide.

Researchers have been split on the economic impacts of the pay increase for fast-food workers, which chains like Pizza Hut and Cinnabon have fought. (Earlier this year, a major Carl’s Jr. franchisee cited the $20 fast-food minimum wage when he applied for bankruptcy protection.)

California also has higher minimum wages for healthcare workers at large facilities as a result of a union-backed bill Newsom signed in 2023. Under the legislation, many healthcare workers’ minimum wages in July rose from $24 an hour to $25 an hour.

Some cities in California, including Emeryville and West Hollywood, have opted to impose even higher city minimum wages exceeding $20 per hour.

Most states have minimum wages above the federal minimum. Five Republican-led states — Alabama, Louisiana, Mississippi, South Carolina and Tennessee — do not have an independent state minimum wage and default to the federal minimum.

While a 2019 Pew Research Center poll found that two-thirds of Americans support raising the federal minimum wage to $15 an hour, a deep partisan split over the issue remains.

WASHINGTON — With three months remaining until election day, there is now little the Trump administration can do to bring relief to Americans battered by years of stagnant wages and steep inflation before they hit the polls, experts say — complicating midterm campaigning for Republicans and sharpening the opportunity for Democrats to win back some control in Washington.

That’s in part because the Trump administration has very few levers to turn the tide in such a short period, and has shown little interest in using those it does have, experts said. Rather, President Trump has persisted in waging war in Iran and pushed forward with new tariffs on trade partners despite both contributing to soaring costs for food, gas and other basic necessities.

Other options, such as issuing rebate checks for consumers or releasing strategic oil reserves, would be costly in the long run, experts said.

“There isn’t much available on a 14-week clock that doesn’t cost more later than it delivers now,” said Patrick Harker, professor at the University of Pennsylvania Wharton School and former president of the Federal Reserve Bank of Philadelphia.

The Federal Reserve on Wednesday also declined to use its primary tool for reducing inflation — increasing interest rates — by instead holding rates steady. Trump had not supported a rate increase, instead pressuring the central bank to lower rates, which can lower borrowing costs but increase inflation.

Some factors driving up costs are virtually impossible to resolve in the near term, such as damage to oil refining capabilities in the Middle East as a result of the war in Iran. Others are already baked into pricing to come as a result of tariffs and fuel costs, including for groceries, experts said.

Incumbent parties often suffer midterm losses when voters are broadly pessimistic about the economy, as they are now despite remarkable resilience in the U.S. labor market and strong stock returns.

Consumer prices declined in June for the first time in six years, largely thanks to a decline in gas prices as the Iran war appeared headed toward a resolution — which is no longer the case.

New data Thursday showed the U.S. economy growing at a sluggish 1.5% pace from April through June. It also showed consumer spending and inflation slowing down. But slowing inflation has not meant lower costs.

As the Iran war entered its sixth month this week, average gas prices nationally climbed back above $4 a gallon. On Wednesday, the price of Brent crude oil rose to $90 a barrel as the U.S. and Iran carried out new strikes.

The White House did not respond to a request for comment. However, Trump asserted Wednesday that the economy is strong — citing in part new U.S. automobile plants as evidence — while slamming the Federal Reserve’s decision to leave interest rates unchanged.

“They want to keep rates up, but we will fight through this,” Trump told reporters at an Oval Office event. “We have things that are going on in our country in the likes of which no one has ever seen.”

As Democrats have seized on the economy as the midterms’ defining issue, Trump has promised improvements but also called affordability concerns a “hoax.” Last week, he rejected the notion that he should rethink his unpopular Iran strategy because of the looming midterms.

“No, the election — I can’t think about that having to do with this,” he said before renewing attacks last week. “I think people are very impressed.”

Jonathan Nagler, a New York University professor who studies how the economy shapes politics, said it is impossible to predict how voters will feel about the economy three months from now, because there are so many variables.

But data make clear that “the better the economy is, the better the incumbent does,” and voters will blame Trump and his party for their economic woes if they persist, Nagler said — particularly with gas prices, which are “a non-trivial expense” that is “super directly tied to Trump.”

“Democrats can draw a very straight line from a decision by Trump to go to war with Iran, and gas prices rising. That is just very, very easy to explain to people in a pretty convincing way,” Nagler said. “Democrats can try to say, ‘Hey, there should be some accountability here.’”

Diane Swonk, chief economist at KPMG, said inflation has compounded for years “to make the level of prices too high for too many,” and is clearly the biggest economic issue facing many Americans.

“And that’s not likely to change in the next few months, where you still not only have some of the spillover effects of the war in Iran to play out — most notably in terms of the fall harvest and food prices, which will go well into 2027 — but also just the on-again, off-again truces and the damages to refining capacities,” she said.

All of that is adding to “simmering” service sector inflation and Trump’s latest tariffs, which mean “more paperwork, more costs, and another bump in prices in the pipeline,” Swonk said.

Harker said the administration has no good options for bringing down prices by November. Reducing tariffs takes time to filter down to shelf prices, so that can’t offer a quick fix even if Trump were to decide to cut them, he said.

The biggest variable between now and November is energy, Harker said, and no economic tool allows the administration to control what happens in the Persian Gulf. Even if Trump’s war with Iran were to end, economists say it would take a significant amount of time for gas prices to come down.

The Fed could decide to raise rates in September, but Harker said that would take time to filter through the economy and would do “nothing” ahead of November.

On the campaign trail, Trump promised to immediately “reverse the disastrous effects of [President] Biden’s inflation and rebuild the greatest economy in the history of the world,” one where “incomes will skyrocket, inflation will vanish completely, jobs will come roaring back, and the middle class will prosper like never, ever before.”

A recent CNN poll found that 65% of Americans believe Trump’s policies have worsened economic conditions in the country, while less than a quarter — 22% — said they had improved conditions, and that 67% believe Trump’s choices in Iran hurt the U.S.

The poll found Trump had a 34% approval rating, matching a career low from the end of his first term, and that his support fell even lower on key issues: to 28% on Iran, 25% on inflation and 21% on gas prices.

A recent Pew Research Center survey found most Americans aren’t feeling great about the economy — with 24% rating economic conditions as excellent or good, 41% rating them as “only fair,” and 35% rating them as poor. It also found that voters want candidates running for Congress in November to talk about economic issues.

Democrats see the poll numbers as an opportunity to win over swing voters, which becomes more urgent as the campaign enters its fall stretch.

House Democratic Leader Hakeem Jeffries (D-N.Y.) last week placed blame for rising costs squarely on Trump‘s tariffs, his “reckless war of choice” in Iran, and cuts to healthcare made in last year’s federal spending package.

Vidhya Jeyadev, a spokesperson for Majority Democrats, which is focused on growing the party, said Democrats now have an opportunity to bring in Republican voters disillusioned with the president’s handling of the economy.

“We need to tie what people are feeling day to day — rising rent, groceries, utility costs — directly to the choices that Trump and Republicans have made,” Jeyadev said.

Many Republican leaders have acknowledged economic challenges while defending Trump’s policy decisions.

They have broadly backed the war in Iran as a necessary step to halt Iran’s nuclear ambitions. House Speaker Mike Johnson (R-La.) recently defended Trump’s tariffs, too, acknowledging some sectors have experienced “challenges” as a result, but saying “all that’s settling out as we go into this election cycle.”

Swonk said some economic indicators do show a surprisingly strong economy that benefits the rich.

However, “there’s a reason people are upset, and that’s because inflation, much like stock returns, has compounded — but not everybody has stock returns. Everybody feels inflation. And that drives a larger wedge between the haves and the have-nots,” she said.

“What anyone really cares about is the prices that went up didn’t come back down, and their wages didn’t keep up with it,” Swonk said. “It doesn’t feel like you can do as many things as you once did. And that’s hard.”

GDP grew by 1.5 percent in the second quarter following a 2.1 percent increase in first quarter.

Economic growth in the United States slowed in the second quarter amid a growing trade deficit and tensions between the US and Iran which weighed on global fuel prices.

The US Gross Domestic Product (GDP), a measure of goods and services, grew by 1.5 percent between April and June, marking a slowdown from 2.1 percent growth in the first quarter of 2026, according to the Commerce Department’s Bureau of Economic Analysis report released on Thursday.

Consumer spending saw a bump of 3.2 percent for the quarter, both on the back of generous tax refunds from US President Donald Trump’s ‘One Big Beautiful Bill Act’ as well as heightened petrol prices that cost consumers.

Fuel prices are on the upswing after a brief reprieve. The average price for a gallon of petrol (3.78 litres) is $4.09, up from $3.84 this time last month, according to the American Automobile Association (AAA), which tracks daily petrol prices. By comparison, the average price was $2.98 when the US and Israel first struck Iran on February 28 .

Analysts also point to the artificial intelligence spending boom as a reason for the surge, even as those are heavily import reliant and contributing to trade deficits.

“Overall, the economy continues to rely on technology investment,” Rachel Ziemba, adjunct senior fellow at the Center for a New American Security, told Al Jazeera.

That will likely continue into third-quarter reports, which will take into account the month of July. On Monday, it was reported that Nvidia is in talks to make a $250m investment in OpenAI.

However, there are concerns about how long such investments will last amid questions over circular financing propping up the sector.

“Data centres continue to drive investment and economic growth, increasing the sector’s role in the economy while raising questions about its sustainability,” Ziemba said.

Meanwhile, the Personal Consumption Expenditure Price (PCE) Index report, one of the US Federal Reserve’s key metrics for gauging the rate of inflation, increased 3.7 percent on an annual basis for the month of June after a 4.1 percent surge in May.

The slowdown was marked by a brief retreat in petrol prices last month before they climbed higher again over the past month.

“Today’s report is a snapshot of an economy under a ceasefire that no longer exists. Even with last month’s temporary inflation relief, prices are still elevated and families are saving less as they try to keep up,” Alex Jacquez, a member of the National Economic Council under former US President Joe Biden, said in a note provided to Al Jazeera.

On Wednesday, the US Federal Reserve opted to maintain interest rates at 3.5-3.75 percent.

US markets are on the upswing in midday trading, largely driven by an increase in Microsoft stock amid better-than-expected sales and growth in cloud services. Markets have also risen following the PCE and GDP reports.

The tech-heavy Nasdaq is up 2.6 percent, with the S&P 500 following at 1.2 percent and the Dow Jones Industrial Average up 0.5 percent.

Gold prices, which are typically considered a safe investment during economic uncertainty, extended their gains by 1.9 percent to $4,108.30 per ounce after rising 2 percent on Wednesday.

The United States Federal Reserve is set to hold interest rates steady as inflationary pressures mount, driven by heightened fuel prices as tensions between the US and Iran continue.

The central bank said on Wednesday that it will maintain rates at 350-375 basis points during the second monetary policy decision under new Chairman Kevin Warsh.

“Inflation remains elevated relative to the Committee’s 2 percent goal, in part reflecting supply shocks that have driven price increases in certain sectors, including energy. The Committee will deliver price stability,” the central bank said in a statement upon the release of its decision.

CME FedWatch, which tracks the likelihood of monetary policy decisions, forecast a 66.3 percent chance of maintaining rates, while there was a 33.7 percent chance that rates would increase to 375-400 basis points.

Of the 12, three members, Beth M Hammack, Neel Kashkari, and Lorie K Logan, voted to raise rates by 25 basis points.

“My colleagues and I considered the economic shocks of recent years, strained supply chains arising from the pandemic, military conflicts, energy supply disruptions, substantial increases in tariff rates, and yes, the surge in AI-related investment,” Warsh told reporters.

“We are not relying on any one individual piece of data as cover or as an excuse, or as validation. What I care about and what I think the Committee cares about is trends on the data.”

Monetary policy decisions have become more uncertain as Warsh has scrapped forward guidance, which typically helps financial institutions and journalists better understand upcoming policy choices.

Flying blind

That is putting pressure on analysts.

“With little guidance on the reaction function under the new chairman, markets are filling the void with speculation that Warsh may be eyeing a surprise hike to reinforce anti-inflation credibility,” Barclays economists said in a note.

Citadel Securities earlier this week forecast a rate hike. Meanwhile, analysts at S&P Global forecast that rates would hold steady.

At the last meeting, the central bank’s governors were evenly split on whether to raise interest rates this year, as the central bank maintained rates during its first meeting under Warsh.

Warsh had previously said that there was “no tolerance” for inflation as the central bank pushes to reach the Fed’s 2 percent target.

Market shifts

Financial pressures on the broader market eased last month, with consumer inflation moderating. The Consumer Price Index report released in July for the month of June by the US Labor Department’s Bureau of Labor Statistics showed a 0.4 percent decline in consumer inflation, marking the first monthly decline since April 2020 in the early days of the COVID-19 pandemic. However, that was a correction from the previous month, when the CPI rose by 0.5 percent.

The CPI remains elevated at 3.5 percent on an annual basis, according to the report, though that is still a slowdown from 4.2 percent in May. However, consumers are still feeling the pinch, especially at the petrol pump.

Prices are on the upswing. The average price for a gallon of petrol is $4.09 ($1.08 per litre), up 3 cents from this time last week, and up from $3.86 ($1.02 per litre) this time last month, according to the American Automobile Association (AAA), which tracks daily petrol prices. By comparison, daily petrol prices were $2.98 ($0.78 per litre) when the US and Israel first struck Iran on February 28.

Those pressures are echoed by a slump in consumer confidence for the third straight month, according to The Conference Board, which released its report on Tuesday.

“Consumers anticipate little improvement in business conditions over the next six months,” Dana M Peterson, chief economist at The Conference Board, said upon the report’s release.

Political flashpoint

The decision is overshadowed by pressure from the White House. Interest rates have been a point of contention between Trump and the central bank. Trump has long pushed the Fed to cut rates, putting former Chair Jerome Powell in the crosshairs and making him the subject of investigations by the US Department of Justice.

But Warsh has yet to become a target of Trump’s scorn. “Kevin is fantastic,” he told reporters on Monday on board Air Force One. “He’s got a board, and the board members are very political.”

Trump made those claims despite the central bank’s longstanding commitment to maintaining its independence from political pressure.

Major central banks are confronting an increasingly difficult inflation landscape as multiple price pressures converge, raising questions over whether policymakers can continue treating inflation shocks as temporary.

The U.S. Federal Reserve, the Bank of Japan and the Bank of England all meet this week against a backdrop of elevated inflation driven by rising energy costs, geopolitical tensions, supply chain disruptions, fiscal stimulus, labor market tightness and climate related risks.

While central banks have traditionally argued that isolated price shocks eventually fade without requiring aggressive monetary tightening, economists warn that today’s inflation environment is no longer defined by a single disruption but by several overlapping forces reinforcing one another.

Inflation remains well above target

The Federal Reserve’s preferred inflation measure, the Personal Consumption Expenditures (PCE) Price Index, is expected to remain significantly above the central bank’s 2 percent target.

Economists expect headline PCE inflation to stand at 3.7 percent and core inflation, which excludes food and energy, at 3.3 percent.

Inflation has remained above the Fed’s target for more than five consecutive years, complicating expectations that price growth will naturally return to normal levels.

Energy prices return as a major concern

Renewed military tensions in the Middle East have pushed crude oil prices sharply higher, adding fresh uncertainty to the global inflation outlook.

Brent crude briefly climbed above $100 per barrel before easing, while volatility in oil markets has increased as conflict around the Gulf and Red Sea threatens global energy supplies.

Higher crude prices have translated into rising fuel costs, with average U.S. gasoline prices now more than 30 percent above levels recorded a year earlier.

For central banks, energy inflation remains particularly difficult because monetary policy cannot directly resolve geopolitical conflicts or supply disruptions.

Food inflation adds further pressure

Food prices are emerging as another source of concern.

Annual U.S. food inflation already stands near 3 percent, while forecasts suggest stronger El Niño weather conditions could reduce agricultural production and lift global food prices over the coming months.

Some projections indicate food inflation could approach 5 percent next year, adding further upward pressure to overall consumer prices worldwide.

Unlike financial market volatility, rising food and fuel costs directly affect households and often shape public perceptions of inflation more than broader economic indicators.

Core inflation refuses to ease

Although policymakers often focus on core inflation because it removes volatile food and energy prices, underlying price pressures remain stubbornly elevated.

Persistent wage growth, continued strength in consumer spending and resilient labor markets have prevented meaningful progress toward the Fed’s inflation target.

Economists also warn that prolonged increases in food and energy prices eventually feed into broader consumer prices, making it increasingly difficult to separate temporary inflation from structural trends.

Tariffs and artificial intelligence create new price risks

Additional inflationary risks are emerging from trade policy and technological investment.

President Donald Trump’s renewed tariffs on imported goods could increase costs across multiple industries, while continued demand for artificial intelligence infrastructure has intensified shortages in advanced semiconductor markets.

Higher chip prices are expected to affect consumer electronics and industrial production, creating another potential source of inflation in manufactured goods.

Meanwhile, expansionary fiscal policies and strong financial conditions continue to support consumer demand, limiting the slowdown in prices that central banks have been seeking.

Strong labor markets complicate policy

Employment conditions remain exceptionally resilient across advanced economies.

In the United States, unemployment has remained near historically low levels, while wage growth above 3 percent continues to support household spending.

Although robust labor markets are generally viewed as positive for economic growth, they also contribute to persistent service sector inflation by increasing business labor costs.

This has made it harder for central banks to achieve price stability without risking slower economic growth.

Analysis: Inflation risks are becoming structural

The challenge facing central banks is no longer whether one inflation shock will fade but whether multiple overlapping shocks are creating a new inflation environment.

Energy markets remain vulnerable to geopolitical conflict. Climate related disruptions continue to threaten food production. Trade barriers are increasing production costs, while the rapid expansion of artificial intelligence is reshaping industrial demand and supply chains. At the same time, strong labor markets and expansionary fiscal policies continue to support consumer spending.

Individually, policymakers can argue that each of these factors is temporary or outside the influence of interest rates. Collectively, however, they reinforce one another and increase the likelihood that inflation remains above target for longer than anticipated.

For the Federal Reserve and other major central banks, the risk is no longer simply misjudging one temporary shock. The greater challenge is determining whether today’s inflation reflects a lasting structural shift in the global economy. If these pressures persist simultaneously, policymakers may be forced to maintain higher interest rates for longer, even at the cost of slower growth, making the path back to price stability significantly more difficult than markets currently expect.

With information from Reuters.