Iran Denies Memorandum Has Been Finalized as U.S. Core Inflation Moderates Slightly

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Summary:

The U.S.-Iran memorandum of understanding has not yet been finalized; PCE data came in line with expectations...

Key Headlines

1. U.S. Treasury Secretary: Whether a U.S.-Iran deal is reached depends on “what the President wants to do”

2. The U.S.-Iran “memorandum of understanding” has not yet been finalized

3. PCE inflation data meets expectations, while consumer spending remains resilient

4. EIA: U.S. crude oil inventories fell by 3.33 million barrels last week, a smaller decline than expected

5. Tokyo core inflation falls to a four-year low

6. Hawkesby: Larger rate hikes remain possible if second-round inflation effects emerge

Details

U.S. Treasury Secretary: Whether a Deal Is Reached Depends on “What the President Wants to Do”; Sanctions Relief Depends on Nuclear Concessions

U.S. Treasury Secretary Scott Bessent said during a White House press briefing on the 28th that whether the United States and Iran can reach a potential agreement depends on whether President Trump supports the deal.

Earlier that day, U.S. media cited American officials as saying that U.S. and Iranian negotiators had largely agreed on the terms of a memorandum of understanding, pending Trump’s final approval.

Bessent did not directly answer repeated questions on the matter during the briefing. Instead, he said that teams from both sides have continued discussions and emphasized that everything depends on what the President wants to do.

Bessent stated that Trump has several clear “red lines”: Iran must surrender its highly enriched uranium, Iran must not develop nuclear weapons, and the Strait of Hormuz must remain open.

When asked whether the United States would partially lift sanctions on Iran or unfreeze Iranian assets, Bessent said such measures would depend on whether Iran meets the Trump administration’s core conditions.

He described the U.S.-Iran negotiations as a multi-layered agreement and stressed that nothing would truly be on the table until Iran makes explicit commitments. Any sanctions relief, he added, would correspond to the extent of Iran’s concessions on nuclear issues, including whether it transfers its stockpile of highly enriched uranium.

The U.S.-Iran “Memorandum of Understanding” Has Not Yet Been Finalized

According to Iranian media reports on the 28th, Seyed Aghalou, a member of the Iranian negotiating team’s media unit, denied claims by some Western media outlets that the text of the U.S.-Iran “memorandum of understanding” had already been finalized.

He told Tasnim News Agency that reports claiming the text had been finalized and was “only awaiting official announcement” were inaccurate. He said the document has not yet been finalized, and Iran has not formally informed Pakistani mediators that the text is complete.

Aghalou stressed that Iran has made no commitments on nuclear issues during negotiations with the United States. If the agreement text is ultimately finalized, Iran will formally notify Pakistan and publicly announce the outcome.

Until then, he said, any Western media reports claiming the agreement has been fully completed should not be considered credible.

PCE Inflation Data Meets Expectations While Consumer Spending Remains Resilient

Data released on Thursday showed that the U.S. Personal Consumption Expenditures (PCE) Price Index rose 3.8% year-on-year in April, in line with market expectations and higher than the previous month’s 3.5%. On a monthly basis, the index rose 0.4%, below market expectations of 0.5% and lower than the previous month’s 0.7%.

Core PCE inflation, which excludes food and energy prices, rose 3.3% year-on-year in April, matching market expectations and slightly above the previous month’s 3.2%. On a monthly basis, core PCE increased 0.2%, below both market expectations of 0.3% and the prior reading of 0.3%.

Meanwhile, U.S. personal spending increased 0.5% month-on-month in April, in line with expectations but below the previous month’s 0.9%. Inflation-adjusted real personal consumption expenditures rose 0.1%, down from the previous month’s 0.2%.

EIA: U.S. Crude Oil Inventories Fell by 3.33 Million Barrels Last Week, Less Than Expected

The U.S. Energy Information Administration (EIA) reported that crude oil inventories fell by 3.33 million barrels last week, slightly less than analysts’ expectations for a 3.62 million-barrel decline. Inventories had fallen by 7.86 million barrels in the previous week.

U.S. gasoline inventories declined by 2.57 million barrels, exceeding expectations for a 2.28 million-barrel decrease, after a previous increase of 1.54 million barrels.

Data from the U.S. Department of Energy showed that average daily crude oil imports fell by 800,000 barrels to 5.21 million barrels per day, including a 100% decline in imports from Saudi Arabia.

During the same period, average daily gasoline imports rose by 8,000 barrels to 550,000 barrels per day, while gasoline demand increased by 480,000 barrels per day to 9.25 million barrels per day.

Last week, the U.S. Strategic Petroleum Reserve (SPR) declined by 9.06 million barrels, reaching its lowest level since April last year.

Tokyo Core Inflation Falls to a Four-Year Low

Inflation data released Friday by Japan’s Ministry of Internal Affairs and Communications showed that Tokyo’s core Consumer Price Index (CPI), which excludes fresh food prices, rose 1.3% year-on-year in May.

The figure marked the sixth consecutive monthly slowdown, falling to the lowest level in nearly four years and coming in below market expectations. The situation has placed Bank of Japan policymakers in a difficult position, as they may struggle to justify a rate hike even if they intend to raise rates as early as next month.

The “core-core CPI,” which excludes both fresh food and energy prices and is considered a more objective measure of underlying inflation, rose 1.6% year-on-year, while headline CPI increased 1.4%.

Tokyo inflation data is widely viewed as a leading indicator of nationwide inflation trends in Japan.

The slowdown in inflation was mainly driven by moderating increases in processed food prices, substantial cuts in water utility charges, and continued declines in energy prices due to gasoline subsidies introduced by Prime Minister Sanae Takaichi.

Takaichi plans to soon submit a supplementary budget to parliament in order to extend the subsidy program.

Hawkesby: Larger Rate Hikes Remain Possible if Second-Round Inflation Effects Emerge

Reserve Bank of New Zealand Assistant Governor Christian Hawkesby said in remarks on Friday that the central bank has not yet observed clear signs of medium-term inflation pressures, but it stands ready to respond aggressively should they emerge.

He said the key questions are when to begin raising interest rates and to what extent weak economic growth can suppress medium-term inflation pressures.

Hawkesby stated that all policy options remain under consideration, including a more aggressive 50-basis-point rate hike.

“If the data changes and shows that second-round effects are indeed emerging, the situation would become much worse, and that option would remain available,” he said.

Conversely, if incoming data supports maintaining the current stance, another decision to leave rates unchanged would also be appropriate.

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