IRAN: US/Iran Appear Open To Continuing Diplomacy Despite Escalatory Rhetoric
Axios reports that a source with knowledge of the diplomatic process, "said another round of negotiations between the US and Iran is expected next week, possibly in Switzerland." The report comes as Iran and the US appear to be posturing against a major escalation, after two days of tit-for-tat strikes this week.
- Axios notes, "Qatari negotiators travelled to Iran on Friday, in coordination with the U.S., to meet with Iranian officials in an effort to de-escalate the situation and create the conditions for negotiations to resume, according to a diplomat with knowledge of the visit. The diplomat said "it's clear both sides want to come back to the MOU.""
- The report comes after US President Donald Trump issued a statement declaring the US-Iran ceasefire over, but suggesting that talks between the two countries would still take place.
- Earlier today, Mohammad Baqer Zolqadr, the Secretary of the Supreme National Security Council of Iran, issued a rare public statement declaring, "an attack on infrastructure will be met with a reciprocal response, and the Zionist criminal regime... will not be safe from the response of the fighters."
- The statement appears motivated by US strikes on Tuesday targeting civilian infrastructure, including a railway bridge that is part of a key transit route between Iran and Turkmenistan.
- Zolqadr's statement is signficant as he is the head of the most powerful decision-making body in Iran. Notably, the statement doesn't mention Gulf states and appears to serve primarily as a warning against broader US escalation.
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US INFLATION: Core PCE Estimates Well Centered On 0.27% M/M But Some Outstanding
The below analyst estimates for core PCE inflation have seen relatively little adjustment following today’s CPI release, with the larger move in BofA tracking more down to marking up portfolio management estimates. It’s left an unusually tight grouping around 0.27% M/M for May (+/- 0.01) after 0.24% M/M in April although we’re waiting on some updates from those previously estimating a figure in the 0.3s. These will be tweaked again after tomorrow’s PPI report.
- MS: Core PCE at 0.26% M/M (0.24 prior), “reflecting a stronger-than-expected translation for core services ex housing.”
- Barclays: Core PCE at 0.27% M/M (0.28 prior) for 3.3% Y/Y, with core goods at -0.04% M/M. “The estimate is weighed down a fair bit by an unexpected flattening in the CPI reading for computers and accessories — which receives much more weight in core PCE than core CPI — after a series of firm prints. This is roughly offset by an expected upswing in portfolio services, which should have more than recovered from the tumble of equity markets in April.”
- BofA: Core PCE at 0.27% M/M (0.17 prior) for 3.3% Y/Y. Their initial core PCE estimate “was based off higher-level aggregates and did not account for a likely strong portfolio management and investment advice print given the recent rise in equity prices. After accounting for this appropriately, the strength of portfolio management and investment advice overwhelms the relatively softer core CPI details.”
- TDS: Core PCE at 0.27% M/M for 3.3% Y/Y, with headline at 0.41% M/M for 4.0% Y/Y. “A large portion of the moderation in CPI today came from shelter (rent/OER/lodging away from home), but those components only have about half the weight in PCE, limiting their ability to push down the PCE inflation estimate.”
- GS: Core PCE at 0.28% M/M (0.27 prior) for +3.34% Y/Y, whilst the Dallas Fed’s trimmed-mean PCE could have increased 0.23% M/M.
IRAN: Trump Says US Is Going To Hit Iran "Hard" Again Today
US President Donald Trump has clarified a hawkish statement on Iran he issued on Truth Social earlier today. Speaking at an Oval Office event, Trump was asked specifically on his comment: "Now they [Iran] will have to pay the price." Trump responded: "Well, we will be attacking, them and attacking them hard." He later added, "We hit them hard yesterday. And we're going to hit them hard again today... And we'll see what happens with the deal. They keep tapping us along."
- Trump continued, when pressed if that means 'resuming bombing', "Yeah, well we are. Based on the helicopter, I guess we have the right to do that. [Iran] shot down a very incredible machine..."
- Trump added, "I've been working with Iran for a number of months. And they should've signed the deal. It's a good deal... It was just tap tap tap. I don't know what they're doing... So they then shot at our helicopter..."
- Trump continued, "I gave them a break at the request of [Pakistan]... We want a deal that's meaningful... That works... Not an [Obama] deal... That deal was a path to a nuclear weapon. This is a path against." He later adds that Iran "has agreed" to a deal, "all they have to do is sign the paper. It's fully negotiated."
- Trump declines to say if he will attack Iranian power plants, bridges, and energy infrastructure but says, "I'm not going to say that to you but I could do that..."
IRAN: What Did Trump Actually Say?
- Answering question on whether Iran deal taking too long: "Well, we're going to be attacking them, and attacking them very hard [...] They shot down an incredible machine, at first they said they didn't do it, then they admitted they did it"
- "I've been working with Iran for a number of months. They should sign the deal. It's a good deal [...] It totally prohibits them from ever having a nuclear weapon."
- "I gave them a break at the request of Pakistan [...] They still are working. We want a deal that's meaningful and a deal that works."
- "We'll see what happens. We hit 'em hard yesterday, and we'll hit 'em hard again today. We'll see what happens with a deal, [...] but they keep playing us for suckers."
