Recent weeks paint a divided global macro picture: the Fed under new Chair Kevin Warsh surprises with a hawkish tone, the ECB raises rates for the first time in three years, and the Bank of Israel continues easing. All of this against sticky US inflation, European energy price pressures, and a strong Israeli shekel keeping local inflation contained.

Warsh's Fed: Hawkish surprise

Kevin Warsh, sworn in as Fed Chair in May 2026, led his first FOMC meeting on June 17, and the outcome surprised markets. Rates were held at 3.50%–3.75%, but the substantive shift was in tone: the statement was shortened, all forward guidance and easing bias were stripped, and emphasis was placed on "price stability."

The updated Summary of Economic Projections showed a sharp upward revision in inflation projections, headline PCE now seen at 3.6% for 2026 (from 2.7% in March), and core PCE at 3.3%. The median dot plot now implies a potential 25 bps rate hike by year-end. Nine of 18 FOMC participants project at least one hike.

Macro analyst Lyn Alden described the environment as a "Wild West" era of multipolar geopolitics, fiscal dominance, and eroding institutional trust. She expects the Fed to continue a "gradual print" approach, maintaining Treasury market liquidity through modest balance sheet expansion without aggressive stimulus.

David Beckworth of the Mercatus Center focused on Fed governance under the new chair, highlighting the need for a more systematic policy framework and the risks of fiscal dominance constraining monetary independence.

ECB hikes as Eurozone inflation accelerates

On June 11, the European Central Bank surprised with a 25 bps rate hike, the first in nearly three years. The deposit rate rose to 2.25%, the main refinancing rate to 2.40%, and the marginal lending rate to 2.65%.

The move came amid accelerating Eurozone inflation: annual HICP rose to 3.2% in May, the highest since September 2023 and well above the ECB's 2% target. The ECB raised its 2026 inflation projection to 3.0%.

Eurozone government bond yields followed, the 10-year benchmark yield traded around 3.25%, with German Bunds seeing sharper moves.

Bank of Israel: Rate at 3.75%, next decision July 6

In sharp contrast to global peers, the Bank of Israel continues its easing path. The Monetary Committee cut the rate by 25 bps to 3.75% in late May, following a series of earlier cuts.

Inflation in Israel stands at a moderate 1.9%, comfortably within the 1%-3% target range for about ten consecutive months. The strong shekel, trading around 2.98–2.99 per dollar, helps contain imported inflation and gives the central bank additional policy flexibility.

The next rate decision is due July 6. Market expectations lean toward a hold, but analysts note that if inflation remains tame and the shekel continues to strengthen, further easing could be on the table.

Bottom line

Global macro markets show a picture of policy divergence: the Fed surprises hawkishly under Warsh, the ECB reverses its easing cycle in Europe, and the Bank of Israel uses its relative stability to ease further. Markets appear to be entering a period of monetary policy fragmentation, where each central bank responds to its domestic conditions rather than moving in global sync.