Inflation

Five years after Tunisian President Kais Saied suspended parliament and attained sweeping powers, the country remains sharply divided, grappling with a severe economic downturn and a worsening political deadlock.

Saied’s supporters continue to view the measures taken by him in July 2021 – when he suspended parliament and dismissed Prime Minister Hichem Mechichi – as a necessary “correction” to save the country. The opposition says that since then, state institutions have collapsed, promises have gone unfulfilled, and there has been an unprecedented concentration of power in his hands.

Speaking to Al Jazeera’s Ma Waraa al-Khabar (Behind the News) programme, political and economic experts debated the legacy of Saied’s five-year rule, painting a picture of an economy hindered by a poor business climate, populist policies, and a lack of clear vision.

An economy in free fall

Since Saied assumed near-total control of the levers of power five years ago, Tunisia’s economic indicators have largely plummeted.

Ridha Chkoundali, an economics professor at the University of Tunisia, said that the investment rate in the country has dropped from an average of 20 percent of the gross domestic product (GDP) between 2015 and 2019 to just 8 percent in 2023.

Chkoundali attributed this sharp decline to an environment that drives away investment, exacerbated by a significant burden from taxes, which have risen by five percentage points since 2015.

Taxation, he argued, is no longer used to stimulate investment but simply to collect revenues at the expense of economic growth.

The crisis has hit ordinary Tunisians the hardest. Food inflation has reached nearly three times the general average, severely eroding purchasing power. Meanwhile, unemployment has surged, particularly among university graduates, pushing many to leave the country for better economic opportunities abroad.

Mohamed Abbou, a former minister of state and former secretary-general of the Democratic Current party, argued that the crisis is rooted in Saied’s style of governance, adding that the rule of law has been replaced by a climate of intimidation and threats.

“Tunisia has lost all credibility,” Abbou said. “Everyone fears the situation in Tunisia because there is no rationality… there is no stability in laws, taxes, or anything else.”

Abbou particularly criticised Saied’s approach to international finance, pointing out that the president rejected a deal with the International Monetary Fund (IMF) purely to maintain a populist image. At the same time, he quietly implemented many of the IMF’s harsh austerity demands, such as halting public sector hiring and reducing imports.

However, supporters of the current government argue that it is unfair to blame Saied’s administration entirely for an economic crisis that predates his rule.

Political analyst Souhaib Mezrigui says the current situation is the result of an absence of any clear economic or social vision over the past 10 years. He placed blame for the current crisis squarely on the political class that has ruled Tunisia since the 2011 revolution.

Protests and political prisoners

Tunisia’s economic stagnation has manifested into tangible anger on the streets. Coinciding with the five-year anniversary, thousands of Tunisians rallied in the capital’s Habib Bourguiba Avenue on Saturday, protesting against deteriorating living conditions, rolling water and electricity cuts, and a backsliding in democracy.

Organised by a coalition of opposition parties and the “Nafas” civil initiative, the crowds called for Saied to “leave” and revived the 2011 democratic revolution’s rallying cry: “The people want the fall of the regime”.

A central demand of the protests was the release of political prisoners, who have filled Tunisia’s jails since Saied began his crackdown on dissent. Among the most prominent detainees is Rached Ghannouchi, the 85-year-old former parliament speaker and Ennahdha leader, who was recently sentenced to life in prison.

Ghannouchi’s health has rapidly deteriorated in detention. He recently fainted in Mornaguia prison, where temperatures reportedly reached 52 degrees Celsius (126 degrees Fahrenheit). Rights groups and families of detainees, such as opposition politician Ahmed Nejib Chebbi, have repeatedly warned about the dire conditions inside the detention facility and the toll it is taking on elderly inmates.

Imed al-Khamiri, a spokesman for the Ennahdha party, told Al Jazeera that the continued detention of political figures and opposition leaders remains a “disgrace to the Tunisian state”.

US lawmaker calls for sanctions

Saied’s consolidation of power has also drawn renewed international condemnation. Marking the anniversary, US Representative Joe Wilson issued a scathing statement, accusing Saied of transforming the Arab world’s only constitutional democracy into a “one-man dictatorship”.

Wilson accused the Tunisian regime of phenomenally increasing corruption, destroying opportunities for the youth, and shifting its alliances to become a close associate of Russian President Vladimir Putin, Iran, and Hezbollah.

Noting that Saied’s government has even jailed US citizens, Wilson urged the US State Department to issue a “Level 4: Do Not Travel” advisory for Tunisia.

“I will also continue to work to pass the Tunisia Democracy Restoration Act imposing sanctions on Saied and his inner circle,” Wilson stated on the social media platform X, adding: “Democracy in Tunisia will win in the end. Madmen tyrants will not last.”

The European Central Bank kept interest rates unchanged on Thursday, holding steady as it waits to see how much of a lingering energy shock from the Middle East conflict will feed through into eurozone inflation.

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The ECB’s governing council held the deposit facility rate at 2.25%, with the main refinancing rate staying at 2.4% and the marginal lending facility at 2.65%.

Monetary policy for the eurozone is set through these three key interest rates, with the deposit facility rate serving as the main benchmark.

“The outlook for energy prices, while highly volatile, currently stands close to the baseline of the June Eurosystem staff projections and well above the levels recorded prior to the conflict in the Middle East,” the central bank’s statement read.

“Uncertainty remains high and the full inflationary impact of the energy shock has yet to play out. The Governing Council is therefore closely monitoring the intensity and duration of the shock, as well as its indirect and second-round effects,” it added.

The decision follows confirmation last week that eurozone inflation eased to 2.8% in June from May’s 3.2%, the first decline this year, with core price growth slowing to 2.4%.

The pause comes just six weeks after the ECB raised rates for the first time in nearly three years, responding to a war-driven energy shock that had pushed inflation to its highest since September 2023.

ECB President Christine Lagarde has been careful to keep the door open.

At the central bank’s Sintra forum, Lagarde insisted June’s move was not an “insurance hike” but a response to a genuine inflation problem, with projections showing a return to the 2% target only in late 2027, and only if monetary policy tightened further.

Lagarde also refused to pre-commit to a path, saying “forward guidance is not currently in the cards.”

July is not a forecasting round and economists at ING, for example, had argued the bank would prefer to wait for September’s fresh projections, when they see a second hike as the more realistic outcome.

The complication is that the shock behind June’s hike is back.

Oil neared $120 a barrel in March before sliding to around $72 after an interim peace agreement at the end of June, but the truce has frayed badly this month, with the US and Iran exchanging fresh strikes, attacks on tankers and renewed sanctions pushing Brent back above $90 a barrel.

A prolonged rise in energy prices would feed through to household bills and headline inflation in the second half of the year, precisely the second-round effects central bankers currently fear.

The ECB and its peers

As the chart shows, Frankfurt tightened from previously being far below its peers.

The Federal Reserve’s target range sits at 3.50% to 3.75% and the Bank of England’s rate at 3.75%, while the Swiss National Bank is parked at zero.

Both of the ECB’s larger counterparts decide again next week.

The Fed announces next Wednesday, with futures markets assigning roughly an 89% probability to a hold, according to CME’s FedWatch tool, after June’s unanimous decision and projections signalling no cuts this year.

The Bank of England follows the next day, on 30 July, with new forecasts in tow and economists overwhelmingly expect a hold at 3.75%, although a Reuters poll found nearly 40% see at least one hike before year-end, after two policymakers voted for an increase to 4% in June.

For now, the ECB is the only major Western central bank to have actually raised rates in this cycle.

Eurostat’s final figures, published on Friday, showed annual inflation easing from 3.2% in May to 2.8% in June, the first decline since prices began accelerating in January, less than a week before the ECB’s Governing Council announces its policy decision on Thursday and decides whether June’s first interest-rate hike in nearly three years should be followed by another increase.

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The details of the release lean towards a pause.

Core inflation, which strips out energy, food, alcohol and tobacco, slowed from 2.6% to 2.4%, energy inflation cooled from 10.8% to 8.5% and services eased from 3.5% to 3.2%, with the headline rate falling in 22 of the EU’s 27 member states.

Among the eurozone’s big four economies, Germany stood at 2.4%, France at 2%, Italy at 3% and Spain at 3.6%.

The numbers matter because of what came before.

In June, the ECB lifted its deposit facility rate from 2% to 2.25%, its first increase in nearly three years, after the war in Iran drove eurozone inflation to 3.2% in May, the highest reading since September 2023.

A reignited Iran war

The complication is that the shock behind that hike has returned.

Oil neared $120 a barrel in March before sliding to around $72 following an interim peace agreement at the end of June, but the truce has frayed badly this month.

The US and Iran have exchanged fresh strikes, Tehran has attacked ships and threatened regional energy exports, and Washington has reimposed sanctions and stepped up its naval blockade, pushing Brent crude back up to $87 a barrel on Friday.

That resurgence has revived the possibility of a surprise hike on Thursday, according to ING, although the bank still expects a hold, with a second increase more realistic in September.

Renewed conflict involving Iran

The complication is that the shock behind that June rate hike has returned.

Oil prices neared $120 a barrel in March before sliding to around $72 following an interim peace agreement at the end of June. However, the truce has frayed badly this month.

The United States and Iran have exchanged fresh strikes, Tehran has attacked commercial shipping and threatened regional energy exports, while Washington has reimposed sanctions and tightened its naval blockade, pushing Brent crude back up to $87 a barrel on Friday.

The renewed escalation has revived the possibility of a surprise rate hike on Thursday, according to ING, although the bank still expects the ECB to hold rates steady, viewing a second increase as more likely in September.

July is also not a forecasting meeting, giving policymakers cover to wait for updated economic projections before taking further action.

What Lagarde has signalled

Speaking at the ECB’s Sintra forum a few weeks ago, ECB President Christine Lagarde insisted June’s rate hike was not an “insurance hike” but a response to a genuine inflation problem. She noted that the ECB’s projections showed inflation returning to its 2% target only in late 2027, and only if monetary policy was tightened further.

Lagarde also refused to pre-commit to a policy path, saying “forward guidance is not in the cards” and that decisions would continue to be made on a meeting-by-meeting basis, guided by incoming economic data.

The ECB remains the only major Western central bank to have actually pulled the trigger.

The US Federal Reserve left its benchmark interest rate unchanged at 3.50%-3.75% in June, at Kevin Warsh’s first meeting as chair, although his hawkish tone unsettled markets.

The Bank of England also left its Bank Rate unchanged at 3.75% in a 7-2 vote, with two policymakers preferring an increase to 4.0%, while the Bank of Japan raised its policy rate to a 31-year high of 1.0%.

Mojtaba Khamenei says Trump’s signature is ‘worthless’ and that ‘bullying’ is a core element of US foreign policy.

Iran’s supreme leader has warned that the United States will suffer “unforgettable lessons” at the hands of Tehran and its regional allies, accusing the US of repeatedly violating the memorandum of understanding (MoU) between the two countries.

A written statement attributed to Mojtaba Khamenei was read out on state television on Saturday, in which the supreme leader said Washington’s breaches of last month’s MoU showed that President Donald Trump’s signature was “utterly worthless and invalid”.

“The repeated breach of agreements by the Great Satan vis-a-vis the accord has once again proven to all that the signature of the President of America is now utterly worthless and invalid, and that bullying, hegemonism and savagery are inseparable components of the American creed and doctrine,” the statement read.

“Now that the American enemy is seeking to foment war and suffer heavier costs and further humiliation, it should know that the dear nation of Iran and the Resistance Front hold unforgettable lessons for it,” it added.

The US dramatically escalated its attacks on Iran this week by targeting civilian infrastructure, including bridges, railway lines and water desalination plants.

Tehran has responded by successfully striking civilian infrastructure in Kuwait, with authorities there urging everyone to ration electricity.

The US-Israeli war on Iran, which began in February, is seen as existential by the country’s senior leadership.

Tehran has shown no sign of caving to the increasing demands from the Trump administration, as regional countries continue to push for an end to the conflict behind the scenes.

Khamenei said the US has “revealed its true face,” exposing its “deceitfulness, irrationality, unreliability and wickedness”.

He called on Iranians to trust the leadership to protect the country, urging people to remain “vigilant” and “active” as the fighting grinds on.

Reports have surfaced in recent days that the Houthis in Yemen could close the Bab al-Mandeb gateway to the Red Sea in support of their crucial ally Iran. That would further destabilise global energy markets, increase inflation and apply additional pressure on Trump to halt attacks.

The war is deeply unpopular in the US and has inflicted economic harm on Americans.

The MoU mediated by Qatar and Pakistan and signed last month aimed to create the conditions to bring the war to a permanent end.

However, Tehran and Washington have since declared the accord “over” after accusing each other of violating it.

Edward Pinto, co-director of the American Enterprise Institute Housing Center argues that the new US housing bill is unlikely to significantly ease the country’s housing crisis. He says it’s too limited to address the core issues – like restrictive local zoning. For the full segment, watch Al Jazeera’s ‘This is America’.

Tehran, Iran – Three weeks after Iran and the United States signed a memorandum of understanding to extend their ceasefire, their truce remains fragile.

Three tankers have been hit in the Strait of Hormuz over the past two days, even as Iran and the US are expected to restart mediated negotiations to end the war next week, after the funeral of Iran’s Supreme Leader Ayatollah Ali Khamenei.

The US military on Wednesday launched large air attacks on Iran’s southern provinces, which prompted the Islamic Revolutionary Guard Corps (IRGC) and Iran’s regular army to fire missiles and drones on US interests in Bahrain and Kuwait. Both sides accused each other of violating the understanding signed last month.

But even if a long-term resolution is eventually reached and Western sanctions on Iran are lifted, analysts say that it will take time for the country’s economy to recover.

The economy has been strained by years of local mismanagement and corruption; stringent Western and United Nations sanctions; and, more recently, damage sustained from two wars in a year with the US and Israel, deadly nationwide protests in January, and internet shutdowns.

When numbers tell a story

A falling purchasing power has pushed millions into poverty. Inflation has recently climbed to levels not seen since World War II, when Allied forces occupied Iran, took over railways and food supplies, and contributed to a deadly famine.

The latest report by the Statistical Center of Iran for Khordad, the third month of the Persian calendar that ended on June 21, showed inflation increasing by 88.6 percent compared to the same month of the year before. Inflation was up by nearly 6 percent compared to the second month of the current year.

Food inflation was skyrocketing at almost 134 percent in Khordad compared to the corresponding month a year earlier, with oils and fats surging by more than 278 percent, red meat and poultry by over 178 percent, and bread and cereals by nearly 139 percent.

Unemployment is at 7.5 percent during the current calendar year, according to the latest report by the statistical centre released at the end of June. But labour participation is at just 40 percent, meaning that most working-age people are operating outside the official labour force – including students, retirees, those engaged in irregular informal work, and those not seeking paid work.

The job-quality picture is also grim, as salaries are perennially falling behind expenses, as over 38 percent of officially employed people work more than 49 hours a week, and as youth unemployment is at over 20 percent, the centre reports.

The base monthly minimum wage equals only about $95 using the current open market exchange rate of the US dollar in Tehran. The rate has climbed to 1.75 million rials per greenback over recent days, not far from its all-time low of 1.9 million in May.

The damage — and the road to recovery

Due to a heavy budget crunch, the only relief the government is able to offer amounts to a few dollars’ worth of monthly cash subsidy and electronic coupons for purchasing essential goods.

A late June report by the Central Bank of Iran for the previous calendar year that ended on March 20 showed that gross domestic product (GDP) growth for the year stood at minus 0.7 percent, and gross fixed capital formation, a primary indicator of productive capacity and economic growth, was at nearly minus 12 percent. Imports were down 16.6 percent, as were exports by close to 5 percent.

The damage from nearly 40 days of heavy bombardment during the war, the longest nationwide state-imposed internet shutdown in any country, and a US naval blockade of Iran’s southern ports — the full extent of which remains undisclosed to the public — has only exacerbated Iran’s economic woes. The International Monetary Fund has projected that Iran’s real GDP will shrink by 6.1 percent in 2026.

Still, Mahdi Ghodsi, a senior economist at the Vienna Institute for International Economic Studies, said that part of the recent job losses could be recoverable if there is a credible halt to military escalation, restoration of transport and logistics links, more predictable access to energy and fuel, and functioning internet and payment systems.

“In that case, some temporary layoffs in services, retail, transport, construction and small businesses could be reversed relatively quickly, because these activities are highly sensitive to uncertainty and disruptions rather than necessarily destroyed productive capacity,” he told Al Jazeera.

Longer-term challenges

But Ghodsi cautioned that part of the damage is likely to be more persistent.

“Where factories have lost machinery, inventories, imported inputs, workers, working capital, or access to energy, reopening is not simply a matter of returning to normal,” he said, adding that in some cases, full recovery may take years and require large investments, including foreign financing.

Last week, leading satellite imaging provider Planet Labs restored access to imagery for nearly 800 sites across Iran impacted during the war, after lifting earlier restrictions it had placed in response to a US government request to delay or suspend access.

Some Iranians on social media highlighted massive damage done to Iran Electronics Industries (SAIran), a state-owned defence industry heavyweight specialising in optics, communications, semiconductors and medical equipment, among other things.

But along with numerous military-linked sites and assets, and nuclear facilities built over decades now reduced to rubble, Iran’s industrial capacity and civilian infrastructure were also extensively targeted by US and Israeli warplanes and vessels during the war.

Oil and gas facilities, petrochemical and steel giants, electricity outposts, as well as maritime ports, airports, roads, bridges and residential units were significantly damaged.

Work on rebuilding facilities and recovering lost capacities has begun during the period of reduced military hostility over recent weeks, with some airports and industrial units restarting operations.

But a full recovery still appears distant and more destruction could still lay ahead. US President Donald Trump has repeatedly threatened extensive attacks against Iran’s electricity grid and infrastructure like bridges if the war resumes.

Economist Ghodsi said the government’s limited fiscal capacity remains one of the central problems, since the state has already faced struggles in financing not only regular expenditures and salaries, but also obligations across public and semi-public sectors. “This fiscal weakness has been one of the drivers of inflation, as budgetary pressures are partly shifted onto the banking system and the central bank through monetary financing,” he said.

Domestic fissures

Speaking at a state-organised event in Tehran last month, Iran’s President Masoud Pezeshkian expressed concerns about another nationwide protest as public discontent remains high.

“Our most important strength is our unity, and the unity of our people. What I fear is that we fail to serve the people right and they are dissatisfied and come to the streets to protest. Then our might collapses,” he said.

Senior officials spearheading the mediated talks with Washington have backed the process as the viable path to delivering a better economy to the suffering Iranian population.

But hardliners within the system, who perceive Iran to have attained a major victory against superior military powers during the war, continue to vociferously reject giving any concessions.

During Khamenei’s funeral procession in Tehran on Monday, Pezeshkian was filmed getting heckled by anti-deal mourners who demanded blood vengeance for the slain supreme leader and shouted “Death to the compromiser” and “Death to the traitorous homeland-seller”.

The latest data from the Statistical Centre of Iran (SCI) shows the Consumer Price Index (CPI) for the period 22 May–21 June 2026 was 88.6% higher than in the corresponding period a year earlier. In practical terms, a household that spent 100 monetary units on the same basket of goods and services a year ago would now need to spend approximately 189 monetary units to purchase that basket.

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Economists attribute the sharp increase in prices to a combination of long-standing structural challenges and more recent pressures. These include weak economic management, persistent fiscal and monetary imbalances, the continued impact of international sanctions, subdued growth prospects, heightened uncertainty in the business environment and widening fiscal deficits. More recently, military conflict and heightened regional tensions have placed further strain on Iran’s economy by increasing investment risks, disrupting economic activity and adding pressure on public finances.

Statistical Centre versus Central Bank figures

Alongside the figures published by the Statistical Centre of Iran (SCI), the Central Bank of Iran (CBI) has reported different inflation estimates. According to the CBI, year-on-year inflation reached 83.1% at the end of the period 22 May–21 June 2026, while the annual inflation rate stood at 57.7%.

These estimates differ from those published by the SCI, which reported an annual inflation rate of 62.0% and a year-on-year inflation rate of 88.6% for the same period.

The gap between the two sets of estimates amounts to 4.3 percentage points for annual inflation and 5.5 percentage points for year-on-year inflation. Such discrepancies are not unusual in Iran and have recurred over recent years.

The differences largely reflect variations in methodology, including the composition of household consumption baskets, the weighting assigned to individual goods and services, and data collection and sampling techniques. Although both institutions seek to measure changes in the general price level, methodological differences can lead to materially different inflation estimates.

Despite these statistical differences, both sets of figures point to the same underlying trend: Iran is experiencing one of its most severe episodes of inflation in decades. Persistently rapid price growth has become a structural feature of the economy rather than a temporary shock.

Inflation accelerates from 52% to nearly 90%

Recent data indicate that inflationary pressures have continued to intensify rather than ease. Year-on-year inflation increased from 52.6% in December 2025 to approximately 68% in February 2026, before rising further to 88.6% for the period 22 May–21 June 2026.

This trajectory suggests that inflationary pressures have become increasingly entrenched, reflecting deeper structural imbalances rather than a temporary or purely monetary phenomenon.

International forecasts also point to a challenging outlook. The International Monetary Fund (IMF) projects that Iran’s annual inflation rate will average around 68.9% in 2026, placing the country among the highest-inflation economies in the world. At the same time, the IMF forecasts a contraction in real GDP of around 6.1%, indicating continued pressure on economic activity.

Short-term price dynamics are also noteworthy. The Consumer Price Index increased by 5.9% over a single month, from 22 April–21 May 2026 to 22 May–21 June 2026 (the periods corresponding to the Iranian months of Ordibehesht and Khordad, respectively).

A monthly increase of this magnitude illustrates the speed at which prices are rising, making it increasingly difficult for households to maintain purchasing power and plan their finances.

Exchange-rate depreciation and inflation

Iran’s inflation surge – one of the most severe experienced by the country since the Second World War – has been closely associated with the sharp depreciation of the rial. Inflation has eroded the currency’s purchasing power, while successive declines in the rial have, in turn, fuelled further inflation by increasing the cost of imports and raising inflation expectations.

At the beginning of the year, the US dollar traded at around 1.35 million rials on Tehran’s open market. Following the start of US and Israeli air strikes against Iran on 28 February, the exchange rate rose to approximately 1.72 million rials per US dollar.

During the conflict, the exchange rate temporarily strengthened to around 1.46 million rials per US dollar as economic and commercial activity slowed, reducing demand for foreign currency. However, after Donald Trump threatened further US air strikes against critical Iranian infrastructure on 7 April, the rial came under renewed pressure, with the exchange rate weakening to around 1.63 million rials per US dollar.

Following the announcement of a ceasefire, the exchange rate recovered to approximately 1.525 million rials per US dollar. However, as economic activity resumed and Iranian officials estimated war-related damage at around US$300 billion, the rial weakened sharply again, with the exchange rate reaching a record 1.9 million rials per US dollar.

The subsequent signing of a memorandum of understanding between Tehran and Washington led to a temporary appreciation of the rial, bringing the exchange rate back to around 1.53 million rials per US dollar. Renewed tensions between Iran and the United States, however, pushed the exchange rate higher once again, approaching 1.7 million rials per US dollar.

These developments illustrate the extent to which exchange-rate movements have become a key transmission channel for inflation in Iran. Fluctuations in the rial affect not only the domestic cost of imported goods and production inputs but also the inflation expectations of households and businesses, reinforcing upward pressure on prices.

An uneven burden

Inflation has not affected all segments of society equally. Official data show that lower-income households have experienced a greater erosion of purchasing power than higher-income groups.

Year-on-year inflation reached 108.1% in rural areas, compared with 85.2% in urban areas. This disparity is particularly significant because lower-income households typically spend a larger share of their income on essential goods and services, especially food, leaving them more exposed to rising prices.

From a distributional perspective, inflation acts as an implicit tax, disproportionately reducing the real incomes of households with the least capacity to save, invest or protect themselves against rising prices.

Food at the centre of the cost-of-living crisis

The steepest price increases have been recorded in categories most closely associated with everyday household spending. Official statistics indicate that food prices have more than doubled compared with the same period a year earlier.

Year-on-year inflation reached 173.8% for tobacco, around 178% for meat, poultry and related products, approximately 152% for milk, cheese and eggs, and around 139% for bread and cereals.

Non-food categories have also recorded substantial price increases. Prices for furniture and household equipment rose by more than 111%, while transport costs increased by over 103%.

These figures suggest that the inflationary shock extends well beyond food prices. Alongside the rising cost of everyday essentials, households are also facing substantially higher costs for household goods and transport, further eroding purchasing power and placing increasing pressure on household budgets.

Wages fall behind the cost of living

One of the clearest consequences of sustained inflation is the widening gap between wages and the cost of meeting basic living expenses.

According to the Iranian Labour News Agency (ILNA), the official minimum monthly wage for the current year was set at 166.255 million rials (approximately €85), while representatives at a meeting of the Supreme Labour Council on 13 March 2026 estimated that a minimum household living basket would cost around 450 million rials (approximately €225) per month.

On this basis, the official minimum wage covers only around 37% of the estimated cost of a basic living basket, leaving a shortfall of approximately 63%.

The figures illustrate how rapid inflation has eroded real wages. Although nominal wages have increased over time, they have failed to keep pace with the rising cost of essential goods and services, placing increasing pressure on household living standards.

More broadly, Iran’s inflation challenge extends beyond rising prices alone. A combination of persistent inflation, currency depreciation and weakening purchasing power has created a self-reinforcing cycle that continues to undermine household finances and economic stability.

WASHINGTON — A spectacular economic upturn is on its way, President Trump promised Americans last week, galvanized in part by a deal brokered this month to end his war with Iran.

“Very soon you’ll be at $2.50 a gallon for gasoline,” Trump told a crowd Wednesday night on the National Mall. The next year, he said, “is set for an economic boom the likes of which no nation has ever seen before.”

Economists are skeptical. The effects of the war and other factors driving inflation are likely to stick around for months, experts say, presenting an ongoing challenge to American households — and to Trump’s party as it seeks to retain control of Congress in November’s midterm elections.

Yesenia De La Torre, 24, from Culver City pumps gas at the Chevron gas station on Sawtelle Boulevard and Culver Boulevard on June 15. Despite an agreement announced Sunday to end the Iran war and open the Strait of Hormuz, high oil, gasoline prices and energy supply problems won’t be solved overnight.

(Kayla Bartkowski / Los Angeles Times)

The war’s end will not create “a complete snap-back,” said Patrick Harker, professor at the University of Pennsylvania Wharton School and former president of the Federal Reserve Bank of Philadelphia.

“Markets are still cautious, and the infrastructure that’s been destroyed [in the Middle East] is going to take a while to re-create,” Harker said. “Inflation’s going to stay elevated for a while.”

Oil prices were dropping last week — falling to their prewar level Friday — and average gas prices fell by 7 cents per gallon over a week ago. But it will take significant time for oil shipping to ramp up through the Strait of Hormuz, infrastructure to be rebuilt and gas prices to drop, said Michael Negron, senior fellow for economic opportunity at the Center for American Progress.

“I would expect there to be a continued inching downward,” Negron said, but “we’re not going to just go back within weeks to $2.90 per gallon.”

That means the prices of gas and of other essentials aren’t likely to improve dramatically before the midterms, in which affordability has become a driving issue. It could heighten challenges for Republicans, who are defending their majorities in the U.S. House and Senate, as Democrats seek to leverage the issue to gain ground.

Positive messaging about the economy from Trump and other officials “doesn’t really resonate” with Americans who are struggling to make ends meet, said Gina Plata-Nino of the Food Research and Action Center, a national anti-hunger advocacy organization.

“When you’re still making the same amount of money but there’s less for you to be able to pay [for] your basic needs — gas is more expensive, food is more expensive — it doesn’t really add up,” she said.

A fruit stand on West 7th Street sells bananas for $2 per bunch.

(Carlin Stiehl / For The Times)

Americans question the costs

The Iran war has cost the average American household between $775 and $1,300 so far in fuel and taxpayer costs, according to an analysis by Roger Pielke, a senior fellow at the American Enterprise Institute.

The national average gas price sat at $3.90 on Friday, according to AAA, and California’s average was $5.48 per gallon, down 13 cents from a week earlier.

The increase in oil prices has also affected diesel and fertilizer prices, creating a ripple effect through several sectors, including agriculture. Consumer prices rose 4.1% in May from a year earlier, putting the inflation gauge at a three-year high.

Trump has leaned on a bullish message about the economy, but he has largely dismissed Americans’ worries about affordability, calling it a “fake word” and a “hoax.” Last week, he undermined the first major progress by Congress on the issue, refusing to sign a bipartisan housing affordability bill after both chambers passed it.

President Donald Trump closes his eyes as Dr. Ben Carson, left, speaks during an event with the White House Religious Liberty Commission in the Oval Office on Friday.

(Anna Moneymaker / Getty Images)

Meanwhile, the president’s approval rating on the economy dropped to 33% last week in an NPR/PBS News/Marist Poll — his lowest ever for that poll and 3 points below former President Biden’s worst reading on the question during his term.

Nearly four-fifths of respondents said that gas prices present some sort of strain, with 34% categorizing it as a major strain and 44% calling it a minor strain. Half of respondents who said they were not vacationing this summer said cost was the reason.

And only 23% of Americans say the war was worth the costs, according to a Reuters/Ipsos poll conducted days after the Trump administration announced the framework agreement to end the conflict earlier this month.

“People [are] just feeling like they’re getting left behind,” Harker said. “That’s a very real, palpable feeling when you go out and talk to people. They’re worried.”

The president and his party need a midterms message that “real economic change” is coming, said Brian Reisinger, a rural policy analyst in Wisconsin and a former GOP strategist.

“It has to be substance behind the sell,” Reisinger said.

Senate Majority Leader John Thune (R-S.D.) speaks to reporters after the weekly Senate policy luncheons at the U.S. Capitol on Tuesday in Washington, D.C. Thune spoke on a meeting with President Trump on the Iran deal.

(Kevin Dietsch / Getty Images)

U.S.-Iran talks on shaky ground

Trump’s boosters have hailed the Iran deal as a victory for the president. And Trump has justified the shock to gas prices as “worth it not to have a nuclear weapon” in Iran, though the war has not achieved the president’s stated aims, which included the elimination of its nuclear program.

“President Trump was clear all along that there would be short-term, temporary disruptions to energy markets, and that oil and gas prices will quickly fall as soon as the Iran situation is resolved,” White House spokesperson Taylor Rogers said Friday.

How rapidly the conflict will be resolved is not yet clear. The U.S.-Iran negotiations were on shaky ground by week’s end, with each country offering diametrically opposed messaging on the status of key points of negotiation.

Analysts say much of the increase in traffic through the strait has been driven by the return of Iranian oil to global markets. Trump agreed in the controversial deal with Iran to lift sanctions on Iranian oil, allowing Tehran to resume trading its most valuable export and breaking with decades of U.S. policy.

The unpredictability of the talks is another factor keeping energy companies, shippers and insurers cautious for now, Negron said.

“Everything is to be negotiated in the next nearly two months,” he said. “It is natural to expect there to be additional risk priced into each barrel of oil, into the insurance people are paying, just because of the volatility and uncertainty of where we are.”

WASHINGTON — The Democratic National Committee is organizing hundreds of community events across the country this weekend in hopes of harnessing the same concerns about affordability that President Trump capitalized on to return to the White House.

The events include school supply giveaways, food bank drives, neighborhood door knockings and organizer trainings.

“Everything costs too damn much under Donald Trump and the Republicans,” Democratic National Committee Chair Ken Martin said in a statement.

Martin said party members planned “to reach, engage, register, and mobilize voters who will make the difference in races up and down the ballot.”

Two years ago, Democrats were the ones accused of being indifferent to Americans’ anger about rising prices. Now they’re pointing the finger at Trump, who has downplayed the effect of lingering inflation.

He has described affordability concerns as a “hoax” and recently said, “I love the inflation” because he expects costs to drop as he tries to resolve his war with Iran.

About one-third of U.S. adults approve of how Trump is handling the economy, according to an AP-NORC poll from June. That’s down from the start of his second term, when 40% approved.

About 7 in 10 U.S. adults say the country’s economy is “poor,” according to an AP-NORC poll from June. That’s up from 65% in March, and underscores Americans’ ongoing unhappiness with the cost of living, which is being compounded by high gas prices because of the war in Iran.

Slightly more U.S. adults say the Democratic Party would do a better job than the Republican Party in handling inflation and the cost of living, according to a Marquette Law School/SSRS poll from May. Roughly one-third of U.S. adults — 35% — said the Democrats would do a better job, while 28% believe the Republicans would. Roughly one-third say the parties would be the same, or neither would be good.

This weekend’s events vary by region.

In New Mexico, Gov. Michelle Luján Grisham will convene a training for 150 potential campaign staffers. Nevada’s statewide campaigns will knock on doors in rural and working class neighborhoods. Others will call voters in swing districts with competitive U.S. House races to talk about the rising price of gas.

Some events are geared toward directly helping voters to persuade them that Democrats are concerned about affordability.

For instance, the local party in Kenosha County, Wis., plans to collect and distribute school supplies to poor families. And canvassers will fan out to discuss affordability issues in Arizona, Pennsylvania and Wisconsin.

The Republican National Committee dismissed the weekend’s events.

“Despite being millions of dollars in debt, the DNC is choosing to throw pitiful pep rallies to distract from the fact they created the inflation crisis,” said Delanie Bomar, an RNC spokeswoman. “Meanwhile, Republicans are hard at work fixing the economic mess Joe Biden and the Democrats created.”

Democrats hope that the events will show that their time in the political wilderness has made them more serious and effective at tackling kitchen table issues. But some fear their agenda may not be heard by voters in an increasingly fractured media environment.

“One of Donald Trump’s greatest strengths is that he’s so loud,” said Brian Derrick, a Democratic strategist. He said that events like the weekend’s itinerary help Democrats focus on an “Achilles’ heel” issue for Trump, “which right now is his lack of interest in addressing everyday costs for people.”

Brown writes for the Associated Press.

United States President Donald Trump has taken to social media to boast about the state of the economy amid a looming peace deal between the US and Iran, which yesterday signed a memorandum of understanding (MoU) to end the US-Israel war on Iran.

In a post on his social media platform Truth Social, the president claimed that “OIL IS FLOWING” and added that “THE STOCK MARKETS ARE ROARING, JOBS ARE AT RECORDS, AND PRICES ARE DROPPING (AFFORDABILITY!)”

While some of his claims are accurate, others are misleading. Al Jazeera takes a look:

‘Stock Market Just Hit A RECORD High’

That is true specifically for the Dow Jones Industrial Average. That index hit a record high of 51,999.67 for its close on Tuesday amid the potential of a ceasefire and a rally for the newly listed SpaceX.

The Dow slipped from that high on Wednesday amid the US Federal Reserve’s announcement that it would maintain the benchmark interest rate in the target range of 3.5-3.75 percent, and closed down on Wednesday at 51,494.99. The Dow has since jumped 0.35 percent in midday trading on Thursday at 51,671.

The Nasdaq Composite Index and S&P 500 both slipped.

However, this may not directly impact the 38 percent of Americans who do not invest in the stock market.

“The idea that the stock market is doing well does not reflect people’s experiences. There’s a saying that the stock market is not the economy, and that’s an important thing to keep in mind,” Michael Klein, professor of international economic affairs at The Fletcher School at Tufts University, told Al Jazeera.

And that lived experience is at the petrol station and at the grocery store.

‘Prices are dropping’

Petrol prices have started to tumble in the last few days. The average price of a gallon of petrol (3.78 litres) on Thursday is at $3.99, according to the American Automobile Association (AAA), which tracks daily gas prices. That’s down from a high of $4.48 in May, but still well above $2.98, where prices were on February 28 when the US and Israel first struck Iran.

Despite the deal, experts believe that a petrol price decline will plateau for general consumers as the US strategic petroleum reserve, which earlier this week reached its lowest level since 1983, is refilled, all while oil extraction and shipping bottlenecks weigh on supply chains.

“The persistence of the price spikes is the key issue. Transportation, rerouting, insurance premiums, and manufacturing costs don’t normalise overnight, so even when oil stabilises, the cost base across the supply chain will stay elevated,” Tammy Kulesa, director of product marketing for supply chain execution at Blue Yonder, a supply chain management firm, said in remarks provided to Al Jazeera.

Mark Jones, professor of political science at Rice University in Houston, Texas, says prices will not return to prewar levels until the last quarter or close of 2027.

“Even once everybody believes the truce is going to hold [and] there’s no danger going through the Strait of Hormuz, those tankers take months to reach their final destination and come back,” Jones told Al Jazeera. “So the ability to replenish the stocks is going to take until, I think, the early fall [third quarter].”

Consumer inflation, which has jumped at the fastest pace in three years and is at 4.2 percent, has driven prices up on several key goods and has weighed on consumers. While energy prices have risen by nearly eight percent in the last two months alone, prices at the supermarket have jumped by 0.1 percent in May from the month prior after a 0.7 percent increase in April, with the highest increases in goods like bakery products, cereals, nonalcoholic beverages, as well as fruit and vegetables.

“There are real problems facing a lot of people. Prices are high, and wages have not kept up with prices. So people’s real purchasing power has fallen,” Klein said.

Supermarket chains have taken notice. Kroger, the largest supermarket chain in the US, said on Thursday that it will cut prices on thousands of products within its roughly 3,000 stores nationwide. This comes amid increased pressure from Costco and Walmart for value shoppers.

“Customers are being more deliberate with their spending and at times, shopping us selectively. We’re getting too many promotional trips and not enough of the full basket,” Kroger CEO Greg Foran said in a statement.

‘Jobs are at records’

Jobs are not at record levels, despite Trump’s assertions.

The US economy added 172,000 jobs in May. The highest during the second Trump term was 214,000, in March. By comparison, on average, 300,000 jobs were added monthly under his predecessor, former US President Joe Biden, a Democrat, with some months much higher – including July 2021, when the economy added 943,000 jobs, albeit that was on the back of the COVID-19 pandemic as businesses rushed to hire after massive layoffs.

Under Trump, there have been several months of limited job growth that have been hyper-focused on specific sectors like healthcare. On average, employers added only 15,000 jobs a month in 2025. Meanwhile, the US economy lost 92,000 jobs this year in February.

Layoffs are also on the upswing. Job cuts jumped 16 percent between April and May, marking the most layoffs since May 2020 during the height of the pandemic, according to Challenger, Gray and Christmas, with artificial intelligence (AI) as a driving force behind the cuts. Slightly more than 97,000 people lost their jobs in May.

‘Oil is flowing’

Overnight, 12.5 million barrels of crude oil travelled through the Strait of Hormuz, through which roughly a fifth of the world’s oil is normally shipped, according to US Vice President JD Vance. However, data from Kpler shows that travel through the strait is still low, with six verified crossings on June 17.

With the strait starting to open, oil prices tumbled to their lowest levels since the early days of the war as the temporary deal to end fighting and pull back sanctions elevated pressure on global supply.

Brent crude futures LCOc1 dropped $0.78 or one percent to $76.51 in midday trading.

Shipments of liquefied natural gas (LNG) have also ramped up, and a QatarEnergy LNG vessel has returned to Ras Laffan, where it has loaded more than 209,000 cubic metres, according to Kplr.

The value of Iran’s currency has risen by more than 15 percent against the US dollar, and its stock market has shattered records in the wake of the memorandum of understanding agreed between the United States and Iran on Sunday.

However, Iranians suffering for years from extremely high inflation and a plunging rial have found little economic relief as the prices of basic goods, such as food, remain high despite the diplomatic breakthrough.

The Iranian economy has suffered due to decades of US sanctions. The economic crisis was exacerbated after the US and Israel launched a war against Iran on February 28. As subsequent US naval blockade on Iranian ports further added to the misery of Iranians.

In Ferdowsi Street, the beating heart of Tehran’s foreign exchange market, the scene on Thursday was a stark departure from the panic of recent months. Exchange office boards flashed rapidly changing numbers as foreign currencies, led by the dollar, took a sharp dive.

“We closed our doors just hours before the official announcement of the US-Iran understanding at a rate of 1.8 million rials to the dollar,” Amir, a 35-year-old exchange office worker who asked to remain anonymous, told Al Jazeera. “Now it has fallen to 1.54 million rials, and we expect further declines.”

Amir noted a significant increase in sales volumes although buyers remained scarce as many anticipated the rial would strengthen further, potentially dropping to 1.4 million to the dollar or lower.

The recent gains mark a sharp turnaround. After the outbreak of the war, the exchange rate jumped to a historic peak of 1.9 million rials (190,000 tomans) to the dollar in March before settling at about 1.685 million just before recent attacks carried out despite a ceasefire.

A disconnect in the grocery aisles

Despite the rial’s recovery, a walk through Tehran’s grocery stores reveals a starkly different reality. For Iranians grappling with the economic fallout of crippling sanctions and the US naval blockade, the diplomatic thaw has yet to lower the cost of living.

Reza, a 42-year-old Tehran resident, told Al Jazeera that prices for daily staples like milk, cheese, cooking oil and flour remain unchanged. “They say the dollar dropped, but my shopping basket costs the same as last week,” he said. “This means the agreement hasn’t reached our pockets yet.”

From behind the cash register, 55-year-old shop owner Ramin echoed his customer’s frustration. He explained that while the government continues to distribute subsidised goods like bread, the fluctuations of the free-market dollar do not immediately impact basic food prices.

The value of the dollar on the free market varies from the official exchange rate.

Pointing to a shelf of imported goods, another shopkeeper named Karim noted that items like shampoo, toothpaste and laundry detergent are still locked at inflated prices.

“Distributors say they bought these goods two months ago at the old dollar rates,” Karim explained. “Prices will remain high until the old stock runs out and new goods enter at the lower exchange rates.” He estimated it would take at least two weeks for the market to adjust, meaning Iranians will continue to face compounding inflation in the interim.

Euphoria on the trading floor

While Main Street struggles, Tehran’s stock market is experiencing an unprecedented boom amid expectations of improved economic conditions. The trading floor has been awash in green since the initial leaks of the Washington-Tehran agreement emerged.

On Monday, the main index jumped by a record-breaking 161,000 points in a single session, marking the highest-ever influx of cash from individual investors.

By Tuesday, the market continued its staggering ascent, climbing another 112,000 points to cross the psychological barrier of 5 million, ultimately settling at a historic high of 5.1 million.

Saeed, a 40-year-old investor, called it a “historic day”. He noted that investors are rushing to buy shares in the energy and petrochemical sectors, betting heavily on the resumption of exports and the reopening of global markets.

However, Saeed remained cautiously optimistic. “The stock market is often driven by rumours,” he warned. “I don’t want to repeat the experience of the 2015 nuclear deal when the market soared and then collapsed after the US withdrawal.”

He was referring to US President Donald Trump’s 2018 withdrawal from the agreement, under which Iran agreed to restrictions on its nuclear programme in exchange for sanctions relief.

Stagnation in real estate and electronics

The wait-and-see approach in effect has paralysed other sectors of the economy. In central Tehran’s electronics hubs, 38-year-old shop owner Reza reported that while the prices of imported appliances have dropped in tandem with the dollar, sales have stalled because customers are holding out for steeper discounts.

A similar freeze has gripped the housing market. Nasrin, a 36-year-old real estate agent in northern Tehran, observed that a recent price surge that accompanied the initial truce has now given way to stagnation. Many property owners are clinging to inflated prices, seemingly unaware that the market dynamics have shifted, bringing property transactions to a virtual standstill.

‘Not a magic wand’

For macroeconomic experts, the mixed market signals are entirely expected. Hossein Selahvarzi, the former head of the Iran Chamber of Commerce, Industries, Mines and Agriculture, cautioned that the new agreement is “not a magic wand” capable of instantly fixing years of structural issues in the economy.

While the war severely damaged Iran’s infrastructure, Selahvarzi emphasised that the roots of the country’s economic malaise were firmly planted well before the bombing began.

“War is the enemy of investment, production, trade and public welfare,” Selahvarzi told Al Jazeera. He warned against the analytical mistake of believing that a peace memorandum alone would revive the economy.

“Ending the military confrontation does not necessarily mean the beginning of economic prosperity,” he said, stressing that restoring stability to the business environment remains the country’s most urgent priority.

“What we have before us is a limited and fragile opportunity to correct course and rebuild the economy, and this opportunity could be lost quickly if not managed correctly.”

Published on 18/06/2026 – 13:20 GMT+2•Updated
13:35

The Bank of England left its benchmark interest rate unchanged at 3.75% on Thursday, extending a pause that began in December 2025, as policymakers weighed the inflationary fallout from the Iran war against signs of resilience elsewhere in the economy.

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Governor Andrew Bailey and fellow Monetary Policy Committee members were widely expected to keep rates on hold and maintain a broadly neutral stance on future policy moves.

The decision came a day after official figures showed UK inflation holding steady. Consumer prices rose 2.8% year-on-year in May, unchanged from April and below economists’ expectations of 3.0%, leaving the headline rate at its lowest level since early 2025.

However, the stable reading masked diverging trends beneath the surface. Transport costs accelerated sharply to 6.8%, driven by higher fuel prices and rising air fares, while food inflation eased to 2.2% and housing costs continued to moderate.

Though inflation remains above the bank’s target of 2%, the figure raised hopes that the upward pressure on prices emanating from the spike in oil and gas prices after the start of the Iran war on 28 February may have been less than anticipated.

Andrew Bailey, the bank’s governor, said the recent fall in oil prices has been “encouraging” while noting they are still higher than before the war.

“Whatever happens in the future, the higher energy prices of the past four months mean there’s already some inflationary pressure in the pipeline,” he said. “The Bank’s job is to make sure that doesn’t turn into sustained inflation above our 2% target.”

Analysts also cautioned that inflation could still accelerate later this year, as higher household energy bills feed through to prices. Lindsay James, investment strategist at Quilter, said: “Whilst inflation was below expectations in May and currently under 3%, it is still likely to jump closer to 4% later in the year due to the coming impact of a higher energy price cap.”

James added that while oil prices have retreated from recent highs, they remain above last year’s levels, suggesting underlying inflation pressures have not fully disappeared.

The decision to hold the key interest rate was not unanimous, with two of the nine Monetary Policy Committee members voting for a quarter-point rate increase, reflecting concerns that higher energy costs could still feed through into broader inflation pressures.

A labour market losing momentum

Thursday’s labour market release painted a mixed picture.

The unemployment rate dipped unexpectedly to 4.9% in the three months to April, down from 5.0% in the first quarter, yet payrolled employee numbers fell over the period, pointing to an underlying loss of momentum even as the headline jobless rate improved.

Wage growth, a metric the Bank of England watches closely for signs of persistent price pressure, held firm, with regular pay excluding bonuses rising 3.4% on the year.

“The labour market is still continuing to lose momentum, with the latest figures showing a further cooling,” stated Richard Carter, head of fixed interest research at Quilter Cheviot.

Sanjay Raja, chief UK economist at Deutsche Bank, struck a similar note, cautioning that “it’s clear that the labour market is not out of the woods yet,” though he added that the mixed data buys the committee more time to wait and see how the economy evolves.

The combination of cooling headline inflation, a softening jobs market and still-robust pay growth underscores the bind facing the committee. Strong earnings keep alive the risk of so-called second-round effects, where higher wages feed back into prices, even as hiring loses steam.

Published on
17/06/2026 – 12:55 GMT+2

The era of Chair Warsh begins in earnest this Wednesday, as US President Donald Trump’s pick to run the Fed presides over his debut rate decision and steps before the cameras for his first press conference in the role.

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Few economists anticipate dramatic action on day one, but the meeting carries unusual weight for what it might reveal about the months ahead.

Policymakers are expected to hold the benchmark rate steady at a target range of 3.50% to 3.75%, which would mark the fourth consecutive meeting without a move. The committee cut 25 basis points in December 2025.

The bigger question is the language, with officials potentially revising their post-meeting statement to drop any hint that the next step will be a reduction, signalling instead that rates may stay elevated for some time, or even rise should inflation prove sticky.

Warsh inherits a far less accommodating picture than the one he faced when he was widely seen as campaigning for the job last year.

At that time, he argued forcefully for lower rates, echoing US President Donald Trump’s demands, and pointed to AI as a force that could expand the economy’s productive capacity and tame prices over time.

Many economists doubted that thesis even then, noting that the surge of investment in semiconductors and computing equipment was adding to inflationary pressure rather than easing it.

A changed economic backdrop

Inflation has indeed accelerated since the outbreak of the Iran war in late February, climbing to a three-year high of 4.2%, driven largely by costlier petrol.

US President Donald Trump has announced a framework for a peace deal that could end the conflict, but it is unclear whether the truce will hold, and prices for fuel, groceries and airfares could take months to cool even if Middle Eastern oil flows freely again.

By the Fed’s preferred gauge, inflation has now run above its 2% target for more than five years. Hiring, meanwhile, has remained resilient.

May brought 172,000 new jobs, a third straight month of solid gains, removing much of the rationale for the two rate cuts the Fed had pencilled into its January projections.

Because the rate itself looks settled, attention turns to the Fed’s updated Summary of Economic Projections and its closely watched “dot plot”, the quarterly projection of future interest rates.

According to Bank of America economist Aditya Bhave, the new dot plot could show the Fed keeping rates on hold for the rest of 2026, with at least three of the committee’s 12 voting members potentially pencilling in rate hikes this year.

Communication is the other wildcard. Warsh has argued that the central bank should speak less often and keep a lower profile, on the view that publicly stated positions can trap policymakers into defending them well past their usefulness.

One option would be to thin out the calendar of press conferences, reverting to the every-other-meeting rhythm favoured by Ben Bernanke, who chaired the Fed from 2006 to 2014, when the format was introduced. Leaner guidance, however, risks unsettling markets long accustomed to clear direction.

Adding intrigue, predecessor Jerome Powell remains on the board as a governor, a seat he can hold until January 2028, and is expected to vote on Wednesday’s decision, denying the Trump administration an additional vacancy to fill.

Additional sources • AP

WASHINGTON — Ever since Kevin Warsh was nominated by President Trump in late January to lead the Federal Reserve, a question has lingered: Will he seek to raise interest rates to tame inflation or cut them as Trump has long demanded?

On Wednesday, Warsh may provide the first hints of an answer when he oversees his first Fed policy meeting as chair and holds a news conference afterward. Bond markets, which can swing sharply on a chair’s pronouncements, will be watching particularly closely for any signs of which way he leans.

“We expect the press conference to be pivotal,” Jonathan Pingle, an economist at investment bank UBS, wrote in a note. “This will be Kevin Warsh’s first public appearance as Chair. … We do not really know what his policy views are.”

Economists say Warsh will likely aim for a neutral approach, largely because he is taking over the Fed at a challenging time. Rising inflation has made it all but impossible for the Fed to cut interest rates anytime soon, which could stimulate growth and further raise prices. Hiring has improved noticeably since the beginning of the year, removing another key rationale for rate cuts. And the other 11 policymakers on the Fed’s rate-setting committee — including Warsh’s predecessor, former chair Jerome Powell — are split on whether an increase in the Fed’s key rate will be needed or if it can stay unchanged.

High inflation puts Fed in tough spot

Oil prices have fallen sharply on news that the U.S. and Iran have reached an initial deal to end their war, which could eventually cool inflation. Yet it’s unclear whether a permanent agreement can be reached.

“The right thing to do now is wait and see,” said William English, an economist at the Yale School of Management and a former top Fed economist.

Inflation has jumped to a three-year high of 4.2%, the government said last week, mostly because of higher gas prices. Even Trump has backed off a bit from his relentless demands for lower rates, and instead has argued that rate hikes — which the Fed undertakes to cool the economy and slow inflation — aren’t necessary.

In an interview earlier this month on NBC’s “Meet the Press,” Trump said, “Kevin is fantastic and I want him to do whatever he wants,” but added, “there’s no reason to raise rates.”

On Wednesday, the Fed is widely expected to keep its key rate at about 3.6%, where it has remained since last December. When the Fed reduces its rate, over time it can lower other borrowing costs for things like mortgages, auto loans, and business loans.

Changes likely to dash hopes for those seeking lower rates

Still, some changes are expected, which will disappoint those hoping for lower borrowing costs: The Fed is likely to drop language that suggests its next move will be a rate cut, and instead adopt wording that is more neutral. Several Fed policymakers in recent weeks have said that the Fed’s most likely next move is a hike, rather than a cut.

The central bank is also scheduled to release its quarterly economic projections, which include forecasts for how the Fed’s key rate will change over the next three years, on Wednesday. In March, those projections suggested the Fed would cut its rate once this year. Yet on Wednesday they will likely show no change in 2026, with maybe one or two cuts next year, economists say.

Warsh has criticized the projections for providing too much “forward guidance” to financial markets and leading Fed officials to stand by their forecasts for too long, even as the economy changes. Fed watchers will look closely to see if Warsh participates in the quarterly projections. If he doesn’t submit his own forecasts, it could be a sign he will seek to get rid of them entirely in the coming months.

Warsh to bring a new approach to Fed leadership

Outside of policy, Warsh is expected to bring a different style to the Fed than Powell, according to people who’ve worked with him. He wants Fed policymakers to give fewer speeches, have more debates behind closed doors and will likely avoid commenting on the daily ups and downs of the economy. Powell was relatively plainspoken and straightforward, while Warsh has suggested he sees the famously oracular Alan Greenspan, the Fed’s chair from 1987 to 2005, as a model.

“He’s just going to say less, because he doesn’t find that stuff very helpful,” said Robert Tetlow, a former senior policy adviser at the Fed.

Randall Kroszner, an economist at the University of Chicago who served on the Fed’s governing board from 2006 to 2009, when Warsh was also a governor, said the new chair would likely focus on bigger-picture questions, such as how AI will impact the economy. He will avoid thornier issues, such as whether tariffs raise inflation, which Powell was willing to address.

By avoiding such hot-button issues, the Fed could attract less negative attention from the White House, Kroszner said.

“He’s going to stay away from those,” Kroszner added. “If the Fed is to maintain its independence, it needs to maintain its focus.”

While seeking Trump’s nomination, Warsh called for “regime change” at the Fed and criticized the central bank for not preventing the 2021-22 inflation surge, when prices jumped 9.1% in a year, the biggest spike in four decades.

Yet Kroszner said Warsh will likely to seek to build consensus around changing things like the Fed’s communications policies, rather than imposing them. So far, former Fed officials say he hasn’t sought to fire top staff.

“He’s not there to break things,” Kroszner said.

During his Senate confirmation hearing in April, Warsh said he would focus on quelling inflation.

“Inflation is a choice, and the Fed must take responsibility for it,” he said then.

If he acts on that sentiment by keeping rates unchanged — or even raising them — Trump could end up disappointed in another Fed chair. He often threatened to fire Powell, whom he also appointed, for not cutting rates deeply enough.

“There’s at least a risk here that six months down the road, Trump is fulminating about how he didn’t get what he wanted from Warsh, and he’d like to fire Warsh,” English said.

Rugaber writes for The Associated Press.

Published on
16/06/2026 – 8:30 GMT+2

The central bank’s increase in the uncollateralised overnight rate, by a quarter of a percentage point from 0.75%, puts it at a three-decade high.

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The Bank of Japan has been trying to normalise monetary policy lately after decades of keeping interest rates near or below zero. It adopted ultralow rates to try to encourage more borrowing and spending to counter deflation and pull the economy out of the doldrums.

Inflationary pressures because of the war in Iran, which has sent oil prices soaring in recent months, have hit Japan hard since it imports almost all its oil and gas.

Low interest rates had added to pressures on the Japanese yen, which has fallen lately to about 160 yen to the US dollar.

BOJ Gov. Kazuo Ueda, who has been hospitalised recently, did not attend Tuesday’s policy board meeting. Deputy Gov. Shinichi Uchida was expected to take his place at the news conference set for later in the day.

Before the BOJ decision, Tokyo’s benchmark Nikkei 225 index briefly topped 70,000 early Tuesday before giving up some of those early gains.

Additional sources • AP

The preliminary deal to end US-Israel war on Iran has sent oil prices tumbling to a three-month low amid hopes that the Strait of Hormuz will reopen.

But it could be months before American consumers see major relief at the petrol pump.

The closure of the strategic chokepoint disrupted global energy markets for more than three months, cutting off a major shipping route through which roughly one-fifth of the world’s oil and liquefied natural gas normally passes.

On Sunday, US President Donald Trump said prices would “drop like a rock” once the strait reopens, a claim he has made multiple times in the past few weeks.

However, experts caution that a major decline in prices is unlikely to happen as quickly as Trump suggests.

While Asian markets rely more heavily on oil shipped through the Strait of Hormuz than North American markets, tighter supply and steady demand have pushed prices higher worldwide.

On Monday, petrol prices in the US remained above $4 per gallon (3.78 litres), averaging $4.06 nationwide, according to the American Automobile Association (AAA). This was a dip from a high in early May of $4.48 per gallon.

By comparison, prices stood at $2.98 per gallon on February 28, when the US and Israel first struck Iran, triggering a ripple effect across global energy markets.

Energy prices have risen sharply in the US in recent months, increasing 7.7 percent over the last two months alone, and are up 40 percent from a year ago, according to last week’s inflation report from the Labor Department’s Bureau of Labor Statistics,

However, prices are beginning to fall, a dip that began as Washington and Tehran entered negotiations.

“The potential deal that the US and Iran agreed to over the weekend certainly could pave the way for even lower prices… in the next two to three days by what we saw over the weekend,” Patrick De Haan, head of petroleum analysis at GasBuddy, which tracks petrol prices, told Al Jazeera.

But De Haan expects a plateau and says that consumers may not see gas prices at pre-war levels until 2027, even if the ceasefire holds.

“It may take many months, if not beyond a year, for global oil inventories to recover to pre-war levels,” De Haan said.

Amid strains on the supply chain, producers will also need time to ramp up output, while port bottlenecks and heightened demand during the busy summer travel season could delay any substantial relief for everyday consumers.

“There are some mitigating factors that are going to slow the decline in prices. There are a lot of organisations and companies that have to re-up their stockpiles [like the US’s strategic petroleum reserve] and fulfil contracts that have been on hold for the last few months,” John Deal, managing director of capital markets at the Post Oak Group investment bank, said.

Supply chain strains

Fixing kinks in the supply chain takes time.

Oil production slumped amid the war. More than 14 million barrels per day, or 14 percent of the world’s demand, has been shut, according to the International Energy Agency.

Deal said it would take time to get oil production back online.

“My sense is that there’s going to be sustained high demand through the summertime, and we probably won’t get back to pre-war levels [on petrol prices] until after the summer, maybe September or October,” Deal said.

Mark Jones, a professor of political science at Rice University, said that producers might be reluctant to bring full operations back online until they can see the ceasefire hold.

The agreement opening the blockade is for a 60-day negotiation period between the two countries.

“Many [producers] may be reluctant to restart production until they are convinced that the peace will hold, because the last thing they want to do is carry out the costly effort to restart production only to see the conflict revived and then have to shut it down once again,” Jones told Al Jazeera.

Getting production back online is also dependent on the impact individual producers have faced throughout the war.

Refineries that were shut as a precaution could reach as much as 95 percent capacity within 40-60 days, Vitol Bahrain’s head of research, Bader Nooruddin, told the Reuters news agency. Those damaged in the fighting could take much longer.

But bottlenecks at ports could be the biggest hurdle, according to Deal.

“There’s a lag time with shipping capacity. Shipping capacity is perhaps the most significant constraint,” Deal said.

This is because there are more than 500 ships still awaiting passage, according to shipping data from Kpler.

With the ships headed all over the world, it will take them weeks to reach their destinations, dock, and unload at the ports.

That also means a wave of empty ships is waiting in limbo for spots at ports to load cargo and ramp back up to normal operations.

Major shipping giants are in a holding pattern.

Norway’s Wallenius Wilhelmsen and Denmark’s Maersk both told Reuters that they have not changed their Middle East operations in the wake of the announcement.

During the war, there was limited passage through the Strait of Hormuz, with an average of 10 ships a day passing through, compared with 135 that normally transit the waterway, according to an analysis by Bloomberg.

“Tankers take months to reach their final destination and then come back again. So the ability to replenish the stocks is going to take until, I think, the early fall, just from a shipping perspective, to get back to the status quo that was in place before the conflict started,” Jones said, referring to the preferred term for the months of September through November in North America.

At the same time, US strategic reserves are running low, at their lowest levels since 1983. Reserves have tumbled by 18 percent since the war began.

“Demand might keep prices high through the summer as strategic reserves get refilled,” Deal added.

Jet fuel demand will also put pressure on consumers amid the normally busy JuneAugust travel season in the US.

“The war has really affected airlines and their ability to schedule and anticipate how the summer months are going to go,” Deal added.

In April, United Airlines CEO Scott Kirby said that airfares for the carrier may have to jump as much as 20 percent on higher fuel prices.

Grocery woes

The increase in prices is also hitting food budgets.

The most recent consumer price index report showed US inflation ticked up by 4.2 percent compared with this time last year. While inflationary pressures were mostly driven by fuel prices, the impact has still been felt at the grocery store.

Almost half of the world’s urea, which is used in fertiliser, is produced in the Gulf region and passes through the Strait of Hormuz. For American farmers, that means access to fertilisers for the next crop season is more expensive.

Tomato prices, already driven up by Trump’s tariffs on Mexico, have surged 40 percent in the last year amid rising transportation costs.

Lettuce prices rose by more than 16 percent in May, and the price of ground beef increased by about 12 percent compared with this time last year.

Jones warned that food prices may not go down.

“Many retailers, wholesalers, and producers will keep them where they are or only reduce them if forced to from a sales perspective. Unlike petrol, which tends to ebb and flow with the price of oil, prices for many other goods that have been adversely affected by all of this are much less likely to return to where they were prior to the start of the conflict,” Jones said.

“For groceries, for manufacturing goods, for anything that has gone up during the conflict, the price that is there now often becomes the new baseline from which prices move in the future.”

This can be compared with the COVID-19 pandemic period. When the pandemic stalled supply chains, producers increased prices. A 2024 investigation by the Federal Trade Commission found that retail grocers kept prices elevated after supply chain constraints brought on by the pandemic had eased.

“Some in the grocery retail industry seem to have used rising costs as an opportunity to further raise prices to increase their profits,” the report said.

The Washington institution cut its global growth forecast by 0.4 percentage points to 2.5 percent, citing surging energy prices, inflation and borrowing costs.

The conflict in the Middle East is set to bring global economic growth to its slowest since the COVID-19 pandemic, the World Bank has warned.

In its latest Global Economic Prospects report, published on Thursday, the Washington-based institution cut its global growth forecast for 2026 to 2.5 percent from the 2.9 percent it had predicted in January, citing surging energy prices, rising inflation and higher borrowing costs.

The report highlights the significant economic costs of the conflict, which is at risk of flaring up again, as the fragile ceasefire between the United States and Iran is tested on both sides.

The analysis warns that the outlook could decline further if supply disruptions worsen. Iran’s closure of the Strait of Hormuz – a vital passageway for oil and gas transit – in response to the hostilities launched by the US and Israel has put huge stress upon global energy and other supply chains.

The World Bank estimates that Brent crude prices — the international oil benchmark — will average $94 a barrel this year, 36 percent above last year’s average. Fertiliser prices are forecast to increase significantly this year, with knock-on effects for food prices.

Overall, the closure of the strategic waterway will help to push global inflation to 4 percent this year, a substantial increase from last year’s rate of 3.3 percent.

However, the World Bank cautions that global growth could plummet to as low as 1.3 percent this year, should energy supply disruptions worsen, with inflation pushing to 4.4 percent.

The World Bank report also cautions that developing countries are on the front line of the potential impact.

In its report, the institution has downgraded its growth forecasts for two-thirds of countries since January. Global growth is expected to improve to 2.8 percent in 2027, but will remain 0.4 percentage points below the average during the 2010s, during which the world economy was recovering from the global financial crisis.

Excluding China and India, the report worries that developing countries have made little progress towards narrowing their per capita income gap with wealthy nations over the past decade.

“Developing countries have faced a series of challenges over the last decade,” said Ajay Banga, president of the World Bank Group. “The impact differs by country, but the basic test is the same: protect people and preserve stability today, without giving up on growth and jobs tomorrow.”

The World Bank is pledging to assist any developing country experiencing the economic fallout of the Middle East conflict. The organisation says it has set aside up to $60bn to help. It added that if the conflict persists, it can increase its support to $100bn.

WASHINGTON — U.S. retaliatory strikes against Iran will continue after its forces shot down an American helicopter, President Trump said Wednesday, accusing the Islamic Republic of stringing him along over months of negotiations to end the war.

The prospect of a renewed U.S. air campaign cast fresh doubt on the viability of a ceasefire between the United States and Iran that has largely held since April, when the two sides reached a tenuous truce, pausing weeks of fighting. Trump’s decision to resume attacks comes after an exchange of fire between Israel and Iran threatened to spiral into open war over the weekend.

The administration has presented Trump with options to expand U.S. targets beyond the immediate area around the Strait of Hormuz to Iranian power plants across the country, an escalation that will open the president up to accusations he is targeting civilian infrastructure, according to a defense official familiar with the matter.

Speaking with reporters in the Oval Office, Trump encouraged the Iranians to accept a framework agreement negotiated between the two sides, and suggested that additional military action might compel Tehran to accept a final truce.

“We hit them hard yesterday, and we’re gonna hit ‘em again hard today,” Trump said. “And we’ll see what happens with the deal. We were really close to a deal, but they keep tapping us along — they keep playing us for suckers.”

The president’s remarks came a few hours after Trump posted on his social media website that Iran “will have to pay the price” for taking too long in negotiating a peace deal.

When pressed by reporters to elaborate, Trump said he meant that bombing would resume but declined to say whether that would include strikes on Iranian power plants and bridges, a threat he has repeatedly issued during the war.

The ongoing conflict, which is in its fourth month, has left a mark on the global and domestic economy. The U.S. Bureau of Labor Statistics reported Wednesday that inflation accelerated in May, driven by a surge in energy prices linked to the war with Iran.

The consumer price index rose 0.5% on a seasonally adjusted basis — the largest monthly increase in three years — pushing the annual inflation rate to 4.2%.

Asked whether he was concerned about the inflation numbers, Trump told reporters that the “numbers were great.”

“You know what I really love? I love the inflation. You know why? Because as soon as this war is over…,” Trump said, without finishing the thought.

The remark prompted near instantaneous news releases from Democratic operatives, as well as the party war room, which sent out a statement accusing Trump of mishandling a reckless war that has devastated the economy in the process.

“Donald Trump’s disastrous economic agenda and deadly and costly war with Iran have made life unbearable for millions of Americans,” Kendall Witmer, the Democratic National Committee’s rapid response director, said in a statement.

“Working families are shouldering skyrocketing costs for basic goods, with their wages being eaten up by Trump’s soaring inflation,” she added. “On the campaign trail, Trump promised to ‘defeat inflation,’ and to lower costs on ‘Day One,’ but two years later, Trump can’t get a handle on his war of choice with Iran as he tanks the economy back home.”

Trump then told reporters about a secret military mission to ensure safe passage for oil tankers through the Strait of Hormuz, one of the world’s most important commercial waterways. He said the operation had secured the passage of more than 100 million barrels of oil through the strait since it began.

“We took out, the other night, 22 ships late at night with no lights because they don’t have any radar because we blasted the crap out of it,” Trump said.

A couple of hours later, Trump wrote in another post that the military operation had been “wildly successful,” and that it proved the United States — not Iran — was in control of the Strait of Hormuz.

“Their military is defeated, and their economy is lost,” he wrote. “It’s over for Iran!”

Over months of diplomacy with Iran, Trump has sought to avoid a return to conflict, often seeking de-escalation when fighting has flared — and repeatedly pressuring Israel to minimize its attacks in Lebanon, where it continues to battle the militant group Hezbollah, a proxy of Iran.

Israeli strikes continued Wednesday, according to local news reports, while Hezbollah said it carried out attacks on Israeli troops stationed in southern Lebanon.

Speaking to journalists in the Oval Office, the president implied he was losing patience with Iranian tactics at the negotiating table.

“I gave them a break, at the request of Pakistan,” he said. “They still are working on trying them to do what’s right. But we want a deal that’s meaningful. We want a deal that works.”

“It was just tap, tap, tap,” the president added. “I don’t know what they’re doing.”