Inflation at 3-Year High Keeps Fed Rate Hike Risk Alive Despite Iran Peace Deal

Inflation accelerated to a three-year high in April, and a potential peace agreement with Iran may not fully extinguish Federal Reserve rate-hike risks, analysts said May 30, 2026. The Personal Consumption Expenditures price index rose 3.8% from a year earlier, up from 3.5% in March. Core PCE, excluding food and energy, climbed 3.3%. Deutsche Bank cautioned that even if a ceasefire extension opens the Strait of Hormuz, near-term inflation pressures might ease only temporarily. A prolonged closure or higher oil prices could force multiple rate hikes, the bank said. Fed Governor Lisa Cook said she is "prepared to raise rates" if inflation doesn't decline in a timely manner. Minneapolis Fed President Neel Kashkari also warned about rising inflationary forces. The 2-year Treasury yield hovering near 4% signals bond markets expect a quarter-point rate increase. Rate-hike risks remain, as some officials see stickier inflation and a resilient labor market keeping the neutral rate elevated.