Trump Signs Iran Peace Deal as Fed Signals Rate Hikes

President Donald Trump and Iranian President Masoud Pezeshkian signed an interim peace agreement on June 18, 2026, at the Palace of Versailles in France. Mediated by Pakistan, the deal extends a ceasefire for 60 days and unconditionally reopens the Strait of Hormuz to maritime traffic. Terms include the lifting of U.S. naval blockades and the release of frozen Iranian assets in exchange for nuclear curbs. Trump warned that the agreement is not final and threatened to resume military action if commitments are not honored.

Simultaneously, Federal Reserve Chair Kevin Warsh presided over his first Federal Open Market Committee (FOMC) meeting on June 17. The committee voted unanimously to maintain the federal funds rate at 3.5% to 3.75%. However, the meeting revealed a hawkish shift, with nine of 18 policymakers projecting at least one rate hike by the end of 2026 to combat inflation, which reached a three-year high of 4.2% in May.

Warsh announced a structural "regime change" at the central bank, eliminating "forward guidance" and shortening policy statements to encourage markets to react to economic data. He also established five task forces to review the Fed's communications, balance sheet, data sources, productivity, and inflation frameworks. U.S. stock markets reacted negatively to these signals, with the S&P 500 and Nasdaq both sliding more than 1%, while Treasury yields and the U.S. dollar rose.