President Trump escalated his long-running public attack on the Federal Reserve, creating a lose-lose situation for the central bank as it navigates the risks of higher prices and weaker growth from tariffs.

A top Fed official who resisted an aggressive cut last year said she is open to easing interest rates as soon as next month, in a sign support is building among policymakers for a looser monetary stance.

And the U.S. bombing of Iran and direct involvement in Israel’s conflict has added a fresh dose of uncertainty to a U.S. economic picture that was already looking pretty muddled.

President Trump's assault on the Federal Reserve has little modern precedent and forces the central bank to confront a dreadful choice: It could cut rates sharply as Trump demands and risk fueling inflation that damages its credibility with markets. Or it could maintain its current wait-and-see stance, and face further bullying that would weaken its standing if the economy slows sharply and the administration is validated in its view that inflation shouldn’t be a worry.

The presidential pressure is being applied at the same time that a divide is opening up among Fed policymakers that could further complicate Chair Jerome Powell’s effort to balance political and economic hazards in the months ahead.

A reduction in the flow of oil and gas through the Strait of Hormuz could push a range of prices higher, a threat that policymakers are monitoring closely, the head of the European Central Bank said Monday.

The conflict in the Middle East increases the risk that businesses and households in the U.K. will expect the rate of inflation to remain high, and raise their prices and wage demands, a policymaker at the Bank of England said Tuesday.

• The Middle East Is in Turmoil. U.S. Frackers See No Reason to Pump More Oil.

• New York’s Housing Crisis Is So Bad That a Socialist Might Become Mayor

8:30 a.m.: International Transactions
9 a.m.: Johnson Redbook Retail Sales Index
9 a.m.: U.S. Monthly House Price Index
9 a.m.: S&P CoreLogic Case-Shiller Indices
10 a.m.: State Employment and Unemployment
10 a.m.: Richmond Fed Business Activity Survey
10 a.m.: Consumer Confidence Index
10 a.m.: Federal Reserve Board Chair Jerome Powell presents Monetary Policy Report to U.S. House Financial Services Committee
12:30 p.m.: FRB New York President John Williams speaks at NY CREATES and the Center for Economic Growth sponsored event in Albany
1:45 p.m.: Federal Reserve Bank of Minneapolis President Neel Kashkari participates in La Crosse Area Chamber of Commerce event
2 p.m.: Federal Reserve Bank of Boston President Susan Collins speaks at launch of “State of the Nation's Housing” report
4 p.m.: Federal Reserve Governor Michael Barr delivers welcoming remarks at Fed Listens event

7 a.m.: MBA Weekly Mortgage Applications Survey
10 a.m.: New Residential Sales
10 a.m.: Federal Reserve Board Chair Jerome Powell presents Monetary Policy Report to U.S. Senate Banking Committee

The dollar gives up gains triggered by the U.S. attack on Iran after mild indicators and dovish Fedspeak. Governor Bowman says she could support an interest rate cut as soon as next month if inflation cools down. The speech coincided with May existing home sales data, which includes a slowdown of the annual average increase in home prices to 1.3% from 1.8%. — Paulo Trevisani

Chicago Fed President Austan Goolsbee says that the lack of evident inflation pressure since President Trump's April 2 tariffs could allow the central bank to move back to cutting rates. He recounts that the Fed came into the year expecting to bring rates lower, and paused its cuts largely because of policy uncertainty. "If we do not see inflation resulting from these tariff increases, then in my mind, we never left what was I calling the golden path before April 2," Goolsbee says at a conference in Milwaukee. He compares the tariffs to "throwing a lot of dirt in the air so it's hard to see if you're still on the road. But you know, if the dirt is out of the air, then I think we should proceed." —Matt Grossman

• Treasury yields were falling on Monday — but not necessarily because investors were buying U.S. government debt as a safety play in the wake of America’s direct involvement in the Israel-Iran conflict. (MarketWatch)
• Business activity in the U.S., Europe and some large economies in Asia continued to grow this month despite continued uncertainty about global trade policy and the threat of higher energy prices as conflict in the Middle East intensifies. 
• Business confidence in Germany improved this month as firms shrugged off much of the impact of tariffs on Europe’s economy.
• Oil and gas prices plunged Tuesday after Israel confirmed a cease-fire with Iran, easing fears of a broader conflict in the Middle East and potentially severe disruptions to global energy flows.

WSJ Pro Central Banking brings you central banking news, analysis and insights from WSJ’s global team of reporters and editors. This newsletter was compiled by news associate Roshan Fernandez in New York. Send your tips, suggestions and feedback to roshan.fernandez@wsj.com.