U.S. Manufacturing Expansion Slows, Warsh Reaffirms Commitment to the 2% Inflation Target

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Summary:

Warsh says U.S. inflation remains too high; U.S. manufacturing expansion slowed as cost pressures eased...

Highlights

1. Iran calls for the phased implementation of the U.S.-Iran Memorandum of Understanding, with priority given to the release of frozen assets.

2. Vance: U.S.-Iran indirect talks are progressing well, with discussions on nuclear issues set to begin soon.

3. Warsh: U.S. inflation remains too high.

4. Trump says U.S.-Iran talks in Qatar are progressing well.

5. U.S. manufacturing expansion slows as cost indicators decline.

Details

Iran Calls for Phased Implementation of the U.S.-Iran Memorandum of Understanding, Prioritizing the Release of Frozen Assets

According to sources on July 1, the Iranian delegation, during indirect U.S.-Iran talks held in Doha, Qatar, called for the phased implementation of the previously agreed Memorandum of Understanding (MoU), with priority given to provisions concerning Iran's frozen assets.

Iran requested that its frozen assets be released and transferred to the Central Bank of Iran, with the funds designated for food imports. Iranian representatives also maintained that the Strait of Hormuz should remain under the joint jurisdiction of Iran and Oman and rejected any shipping routes through the Strait that have not been approved by Tehran. Iran reaffirmed its commitment to the Treaty on the Non-Proliferation of Nuclear Weapons (NPT) and pledged continued cooperation with the International Atomic Energy Agency (IAEA). In addition, the Iranian delegation criticized Israel's continued military presence in Lebanon, arguing that it undermines the implementation of the U.S.-Iran Memorandum of Understanding.

Vance: U.S.-Iran Indirect Talks Progressing Well, Nuclear Discussions to Begin Soon

On July 1, U.S. Vice President JD Vance said that the indirect technical talks between the United States and Iran held in Doha were progressing smoothly and that discussions on nuclear-related issues would begin shortly.

Vance said technical negotiators are currently discussing implementation details with Iranian and Qatari counterparts in Doha. "We are concerned about the nuclear issue, and we will begin discussing it. So far, the negotiations are progressing well," he said.

Warsh: U.S. Inflation Remains Too High

Federal Reserve Chair Kevin Warsh said on July 1 at the European Central Bank's Forum on Central Banking in Portugal that inflation in the United States remains too high and that ensuring price stability remains the Federal Reserve's top priority.

Despite President Donald Trump's calls for interest rate cuts, Warsh reaffirmed the Fed's commitment to its 2% inflation target, warning that those expecting a shift toward monetary easing would be disappointed.

Warsh also said the Federal Reserve intends to "chart a new policy path," though he declined to elaborate further. He avoided commenting on whether the Fed would raise interest rates at its July policy meeting, stressing that the central bank would not provide forward guidance on future interest rate decisions.

He added that the Fed has established an independent task force to study issues including monetary policy communication, the economic data framework, productivity, the inflation framework, and balance sheet policy. If the current policy framework is found to reduce decision-making efficiency, reforms should be implemented.

Trump Says U.S.-Iran Talks in Qatar Are Progressing Well

U.S. President Donald Trump said on July 1 that the latest round of talks between the United States and Iran in Qatar had gone well.

Trump said Iran's denuclearization process was making good progress and described the meeting between U.S. and Iranian officials in Doha as "very good."

According to a source familiar with the matter and an Iranian official, the two sides held technical talks in Doha on July 1. Trump's son-in-law Jared Kushner and U.S. Special Envoy Steve Witkoff met with the Prime Minister of Qatar but did not participate directly in the negotiations.

Earlier reports indicated that the indirect talks were mediated by Qatar and Pakistan, with discussions focusing on implementing the U.S.-Iran Memorandum of Understanding, including the release of Iran's frozen assets and measures to ensure maritime security in the Strait of Hormuz.

U.S. Manufacturing Expansion Slows as Cost Pressures Ease

U.S. manufacturing activity expanded for the sixth consecutive month in June as the surge in input costs driven by geopolitical tensions began to moderate.

According to data released Wednesday, the Institute for Supply Management (ISM) Manufacturing PMI fell by 0.7 points to 53.3, remaining close to its highest level in nearly four years. A reading above 50 indicates expansion, and the latest figure marks the longest period of sustained manufacturing growth since 2022.

The pace of increases in raw material costs also slowed significantly in June. The ISM Prices Index fell 9.1 points to 73.0, marking its largest monthly decline since July 2022. The easing in cost pressures followed a temporary agreement between the United States and Iran, which contributed to a sharp decline in oil prices.

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