Burhan Sansarlıoğlu
18 June 2026•Update: 18 June 2026
By Burhan Sansarlioglu
ISTANBUL (AA) - Global markets traded mixed Thursday as investors weighed growing expectations that the Federal Reserve could raise interest rates later this year against optimism surrounding the US-Iran peace agreement, which has eased concerns about energy supplies and geopolitical risks.
The Fed left its benchmark interest rate unchanged at 3.5%-3.75% this week, in line with expectations. The decision was unanimous.
However, updated projections reinforced expectations that policymakers could tighten monetary policy further to contain inflation.
The central bank raised its year-end federal funds rate forecast to 3.8% from 3.4%, while lifting its 2027 forecast to 3.6% from 3.1%. Its long-run interest rate estimate was left unchanged at 3.1%.
The Fed also raised its inflation projections to 3.6% for 2026 from 2.7% and to 2.3% for 2027 from 2.2%, while maintaining its 2028 forecast at 2%.
At the same time, it lowered its 2026 growth forecast to 2.2% from 2.4%, left its 2027 projection unchanged at 2.3% and raised its 2028 estimate to 2.2% from 2.1%.
The dot plot showed that nine of 18 policymakers expect at least one rate increase this year.
Fed Chair Kevin Warsh said inflation remained well above the central bank's 2% target and stressed the Fed's commitment to restoring price stability.
Warsh did not submit his own projections to the Fed's dot plot, reflecting his longstanding skepticism toward the practice. Analysts said his remarks suggested the Fed would remain focused on incoming economic data rather than providing detailed forward guidance.
Money markets now strongly expect a rate increase in October, compared with earlier expectations for a move in December.
Meanwhile, sentiment was supported by progress toward a formal agreement between Washington and Tehran.
Pakistani Prime Minister Shehbaz Sharif said the United States and Iran had electronically signed the Islamabad Memorandum and that an official signing ceremony is scheduled to take place in Switzerland on Friday, alongside the launch of technical-level talks supported by co-mediator Qatar.
Optimism that the agreement could reduce geopolitical tensions and prevent further disruptions to energy supplies pushed Brent crude down 1% to $77.70 a barrel.
The yield on the benchmark 10-year US Treasury note rose five basis points to 4.5% on Wednesday as investors priced in higher interest rates, before easing to 4.45% on Thursday amid expectations that lower oil prices could help contain inflation.
The US Dollar Index climbed 1.1% to 100.6 on Wednesday, its first move above 100 since April, before easing to 100.2 on Thursday.
Gold rose 1.4% to $4,316 an ounce.
The World Gold Council said this week that central banks are expected to continue increasing their gold reserves, while the US dollar's share of global reserves is projected to decline over the next five years.
US stocks closed lower Wednesday as investors digested the Fed's policy decision and higher rate expectations.
US retail sales rose 0.9% in May, exceeding forecasts.
The Dow Jones Industrial Average fell 0.98%, the S&P 500 lost 1.21% and the Nasdaq Composite dropped 1.34%. US markets opened higher on Thursday.
*Writing by Emir Yildirim
