Global investors are scaling back their long-term inflation expectations after Federal Reserve governor Kevin Warsh struck a hawkish tone and oil prices fell sharply, pushing bond markets into a “higher-for-longer” era. On Friday, 26 June 2026, the Federal Reserve’s new chair signalled continued vigilance against price pressures, while Brent crude dropped below $70 a barrel, easing one of the key drivers of consumer costs. The shift in sentiment was reflected in Treasury yields, which rose across the curve, and in the dollar’s rebound against the euro, which hit a one-year low as traders priced in delayed European Central Bank rate cuts.

The reassessment comes as global markets remain on edge ahead of Thursday’s US personal consumption expenditures (PCE) and growth data, which will provide fresh clues on whether inflation is truly cooling. While optimism over a potential Middle East peace deal and robust AI earnings initially supported risk appetite, caution has since returned. “The combination of Warsh’s tough talk and the oil price correction has convinced markets that the Fed will keep policy restrictive for longer,” said a senior strategist at Goldman Sachs in New York .

The bond market’s pivot is already reshaping borrowing costs worldwide. European Central Bank watchers now see a lower probability of near-term rate reductions after the euro sank to its weakest level since June 2025, driven by the drop in energy prices and shifting Fed expectations . Meanwhile, gold futures are on track for a fourth consecutive weekly decline as investors reduce hedges against inflation, with the metal trading near $2,250 an ounce .

Domestic demand in major economies is also cooling, which central bankers argue will help bring inflation back toward target. Turkey’s central bank governor Fatih Karahan told reporters on Wednesday that inflation expectations have remained “relatively stable” despite geopolitical risks, citing softer domestic consumption and easing supply shocks in food and energy . Analysts at the FT’s Monetary Policy Radar now expect the Fed to hold rates at current levels through the third quarter, with only a 25-basis-point cut pencilled in for December .

The shift carries real economic costs. High borrowing costs are already crimping capital expenditure in the real sector, delaying expansions and R&D projects across manufacturing and technology hubs. “When producers postpone investments because the cost of capital is prohibitive, the entire production structure distorts,” warned Erdal Tanas Karagöl in *Yeni Şafak*, noting that weaker investment momentum risks undermining long-term growth . With Thursday’s data looming, markets will be watching closely to see whether the latest disinflationary signals hold—or whether the Fed’s resolve is tested once again.

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