Three major central banks are at very different points in their monetary cycles this week — but all face the same core challenge: inflation that refuses to fade. The Fed has a new chair and accelerating price growth, the ECB is on hold, and the Bank of Israel is gearing up for what may be a rate cut — the opposite direction.

The Fed: New Chair, Old Inflation Problem

Kevin Warsh was confirmed as Federal Reserve Chair on May 13 by a 54–45 Senate vote and officially took office on May 15, succeeding Jerome Powell (who remains on the Board). The confirmation was the most contentious in the Fed's history.

Warsh inherits a difficult backdrop. Headline CPI hit roughly 3.8% year-over-year in April — a three-year high — with month-over-month gains of 0.6%. Energy prices are the primary driver: Brent crude trades near $109/barrel, up about 69% year over year.

Markets have all but abandoned expectations for rate cuts in 2026. Instead, the probability of a rate hike by year-end is now around 37% by some measures, and some analysts peg it even higher. The 10-year Treasury yield climbed to approximately 4.65%, while the 30-year bond has breached the 5% threshold.

The ECB: Waiting for Summer

The European Central Bank held rates steady at its last decision on April 30. The deposit facility rate remains at 2.00%, and the main refinancing rate at 2.15%. The Governing Council cited geopolitical shocks and a cautious, data-dependent approach.

The next decision is expected in mid-June. In the meantime, the euro has softened slightly against the dollar, trading around $1.16.

Bank of Israel: Sunday's Decision in Focus

While the Fed deals with accelerating inflation, Israel's picture is different. The benchmark rate stands at 4.00%, unchanged since March when the Monetary Committee paused its cutting cycle due to geopolitical uncertainty around "Operation Roaring Lion."

The next decision is due Sunday, May 25. Prediction markets (Polymarket) price a 68–70% probability of a 25-basis-point cut to 3.75%. Analysts point to April CPI of 1.9% — comfortably inside the 1%–3% target band — and subdued one-year inflation expectations of 1.5%–2.0%.

The shekel is stable at around 2.93 per dollar. If the cut comes Sunday, it would resume the easing cycle that began in late 2025.

The Bottom Line

Three different trajectories: the U.S. faces possible rate hikes under new leadership; Europe is waiting to see whether 2025 cuts were enough; Israel looks ready to cut further. The variable linking all three: energy prices. As long as Brent stays above $100, inflation stays high, and central banks will respond accordingly — gently in most cases, less gently if they have to.