Trump calls 4% inflation 'great' as geopolitical tensions weigh on growth

Inflation data and the Iran narrative

The PCE index rose 3.8% year-over-year in April 2026, while core PCE, which strips out volatile food and energy prices, came in at 3.3%. Both readings sit stubbornly above the Fed's target. The White House's framing pins much of the blame on geopolitical tension. Gas prices stayed above $4 per gallon for several weeks in May 2026, lending some credibility to the energy-cost story—though stripping energy leaves core inflation still running hot.

The OECD isn't as optimistic. The organization has adjusted its US inflation forecast to 4.2% for the full year of 2026, suggesting the problem extends beyond energy alone.

Growth pressures and monetary policy

First-quarter GDP growth was revised down to 1.6%, painting a picture of an economy losing momentum. Companies and economists have already noted that the geopolitical tensions are dragging on economic growth. That combination—sticky inflation and slowing growth—creates a bind for the Federal Reserve.

With PCE running at 3.8% and core at 3.3%, both well above the 2% target, the central bank faces pressure to keep rates elevated. If inflation stays sticky above 3%, the central bank has little room to cut rates. That's a headwind for risk assets.

Crypto in the crosshairs

Bitcoin has been trading in the $79,000 to $80,000 range during mid-May 2026, with price action tightly correlated with macroeconomic announcements and geopolitical developments. The macro backdrop matters. Sustained higher rates historically create headwinds for risk assets, including crypto, by making yield-bearing instruments more attractive by comparison. If rate cuts don't materialize and geopolitical tensions persist, crypto's near-term trajectory likely stays hostage to macro headlines.