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?
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.
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.
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.
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.
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
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.
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.
Published On 7 Aug 20267 Aug 2026
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.
list of 3 itemsend of list
“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.
Falling job-growth numbers drive more people to the gig economy to supplement their income.
The preliminary and seasonally adjusted job-growth numbers for July issued by the U.S. Bureau of Labor Statistics on August 7, paint a picture of a continuing slowing economy, as the agency reported an overall loss of 23,000 non-farm jobs over the month.
The numbers come on the heels of the Bureau’s revised May and June numbers, which reduced the total number of jobs by 103,000, resulting in 63,000 and 20,000 added jobs, respectively.
“The three-month average payroll gain collapsed by more than a third,” wrote Frances Donal, chief economist at RBC, and Mike Reid, head of US economics at RBC, in an analysis note released before the BLS report. “Net revisions to the prior two months subtracted more jobs than were created in June.”
Financial activities lost 14,000 jobs, with credit intermediation and related activities losing 9,000, while insurance carriers and related activities lost 7,000. The sub-sector for securities, commodity contracts, funds, trusts, other financial vehicles, investments, and related activities added a modest 1,000 jobs over the same period.
Healthcare was a standout in July, adding 22,000 jobs.
Once again, there is little correlation between the employment data issued by the Bureau and that published in the ADP National Employment Report for the month, which is slightly more optimistic.
Using its own methodology developed with the Stanford Digital Economy Lab, the authors of the ADP report estimated a gain of 44,000 in U.S. private employment in July, with financial activities gaining 10,000 jobs. Only education and health services beat that gain by adding an estimated 36,000 new jobs. Professional and business services experienced the third-largest gain, adding 9,000 jobs last month.
Findings of the Bank of America Institute’s Employment Report for July, based on anonymized client data, suggest that what job growth occurred in July came from lower-income households, which saw an estimated 2% year-on-year growth, up from 1.7% in June. Higher-income households saw approximately a third of the job growth of lower-income households, while middle-income households saw jobs contract by less than 1%.
The report’s authors noted that the share of fully employed clients active in the gig economy, which has continued to grow over the past three years, is not abating.
The authors conclude that some households are using gig work to “top up” their regular paychecks. In June, nearly half of the gig workers earned income from gig work for only one month in the past 12 months, while 74% of gig workers earned income for three months over the same timeframe.
The gig work that has seen the greatest growth in participation since 2024 is “social commerce,” as thrifting becomes increasingly important to households, the authors write. The number of households seeking to make a little extra via ridesharing, food delivery, content creation, and vacation rentals has returned to close to 2024 levels, with little change.
Rob Daly covers fintech and the economy. Contact him at rdaly@gfmag.com.
On 23 July, the EU adopted its 21st and largest sanctions package against Russia — 218 listings, asset freezes on 94 banks, the first-ever threat of blanket third-country crypto bans. Within 24 hours Beijing retaliated with export controls on 14 European firms, including Germany’s Rheinmetall. The same day, five of China’s largest state banks quietly stopped retail investors trading paper gold and pushed them toward physical bars instead. Four days later the US Senate voted 86-12 to advance a bill authorising tariffs of up to 100% on the top buyers of Russian energy — a list headed by China and India. And on 30 July, the World Gold Council confirmed central banks had bought a record 289 tonnes of gold in the second quarter, up 74% year on year. Nobody reported these five events as one story. They are one story.
De-dollarization is the shorthand for a genuine structural shift: the dollar’s share of global central bank reserves fell below 57% last year, the lowest since 1995 and down 15 points from its 2001 peak, while gold’s share of reserves has climbed from roughly 13% to 30% over the same stretch. The proximate cause is well documented — when Washington and Brussels froze roughly $300 billion of Russian central bank reserves in 2022, every finance ministry outside the Western alliance drew the same lesson: dollar and euro reserves are conditional assets, seizable by political decision, while gold sitting in a domestic vault is not. Since then Russia and China have pushed bilateral trade settlement into rubles and yuan to 99.1%, built out China’s CIPS payment network as a working SWIFT alternative, and are preparing to unveil BRICS Pay — linking Russian, Chinese, Indian and Brazilian domestic payment rails — at September’s summit in New Delhi. That is the infrastructure this week is testing.
To read the full analysis, please subscribe in our MD Briefing here
Published On 3 Aug 20263 Aug 2026
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.
Published On 30 Jul 202630 Jul 2026
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.
list of 4 itemsend of list
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.
list of 4 itemsend of list
“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.
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.
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.
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.
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.
Stay ahead of the geopolitical week.
MD Briefing delivers expert analysis across five global fronts — the Indo-Pacific, energy, geoeconomics, European security, and the Middle East — every Monday morning. Free.
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.
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 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.
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.
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.
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.
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.
Bond investors are increasingly betting that the Federal Reserve could raise interest rates this week after higher oil prices and renewed inflation concerns pushed Treasury yields to multi-month highs, Bloomberg News reported Sunday.
Benchmark 10-year Treasury yields climbed 13 basis
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.
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.
![People gather to protest Tunisia’s President Kais Saied during a demonstration marking five years since his suspension of parliament and assumption of emergency powers, in Tunis on July 25, 2026 [AFP]](https://i0.wp.com/www.aljazeera.com/wp-content/uploads/2026/07/afp_6a657d9303e8-1785036179.jpg?w=640&ssl=1)
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.
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”.
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.
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.
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.
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.
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.
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.
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.
Published On 18 Jul 202618 Jul 2026
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”.
list of 3 itemsend of list
“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’.
Published On 11 Jul 202611 Jul 2026
Share
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.
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.
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.
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.
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”.
Missed payroll expectations and revised April and May numbers put the Fed in a tough spot for rate cuts.
June’s employment numbers showed almost no change from the previous month, as the Bureau of Labor Statistics reported a 4.2% unemployment rate and an estimated 57,000 nonfarm payroll jobs, roughly half the 115,000 economists expected.
At the same time, the agency also revised April’s and May’s total nonfarm payrolls down by 31,000 and 43,000 jobs, respectively.
According to BLS data, the financial activities sector experienced no job growth in June, after losing 22,000 jobs in May and 43,000 from the end of January. Meanwhile, healthcare and social assistance added the most jobs in June, with 46,600. Among the sectors with the largest job losses were leisure and hospitality (-61,000), information (-9,000), and retail trade (-7,500).
“We know it’s taking people longer to find work, but there are also signs of labor supply constraints in certain industries,” said Nela Richardson, chief economist at ADP, in the company’s National Employment Report for June. “For now, the overall effect is a slowdown in job creation.”
Using its proprietary methodology developed with Stanford Digital Economy Lab, ADP estimated that U.S. private employers added 98,000 jobs in June. Financial activities saw an increase of 14,000 jobs, placing it only behind education and health services (48,000) and trade, transportation, and utilities (15,000) in job creation.
Small businesses remain the largest source of hiring, with companies with 1-19 employees adding 38,000 new jobs. The companies with more than 500 employees added an additional 25,000 new positions. The companies that fell in between those sizes added 44,000 new jobs.
The revised April and May employment numbers and June’s lower-than-expected numbers reveal a softer labor market in the second quarter than previously thought.
The new figures have created a headwind for the Federal Reserve on possible rate cuts, as inflation remains close to its 2% target, according to the authors of a blogpost on the Curzio Research website.
“But a slowing labor market argues for cuts to support growth before conditions deteriorate further,” they wrote. “That is why the revisions matter. Every policy decision is only as good as the data behind it. If the Fed is reacting to numbers that keep getting weaker after the fact, it risks staying tight for too long.”
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.
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.
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.
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.
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.
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.
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.
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.
France inflation drops to 1.8%
Source link
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)
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)
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.”