The macro calendar this week was dominated by the ECB Forum on Central Banking in Sintra, Portugal, where the world's top central bankers gathered. Federal Reserve Chair Kevin Warsh, ECB President Christine Lagarde, Bank of England Governor Andrew Bailey, and Bank of Canada Governor Tiff Macklem shared a panel on Wednesday that drew the market's main focus.

The Fed: Warsh Stays Ambiguous

Warsh, making his first international appearance since his May confirmation, conspicuously declined to telegraph the Fed's upcoming July 28–29 rate decision. "We're all in the price stability business, that might not be our only business, but if there was a common thing I heard over the last couple of days, it was open-mindedness on AI, open-mindedness on productivity, but we've all looked around and we've seen that prices are too high," he told CNBC's Sara Eisen.

Markets priced a 70–81% probability of no change in July, with a 19–30% chance of a 25 basis point hike, per CME FedWatch data. The June dot plot showed a median 3.8% for year-end 2026, up from 3.4% in March, with nine of 18 FOMC participants projecting at least one hike by year-end.

The Fed's preferred inflation gauge, the PCE index, stood at 4.1% in May (3.4% core). Warsh made the Fed's position clear: "If there were people in the household or business sector, in the financial markets, who thought that this central bank was going to be comfortable with an inflation objective above 2%, well, I guess they'd be disappointed. We're going to deliver price stability in the U.S."

Eurozone: Cooling Inflation Eases Pressure on the ECB

Eurozone inflation surprised to the downside. The June flash estimate came in at 2.8% year-on-year, down from 3.2% in May and below the 3.0% consensus. Core inflation (excluding energy and food) eased to 2.4% from 2.6%.

The decline was driven by easing energy prices, down to 8.7% from 10.8%, and slower services inflation at 3.2% (from 3.5%). The data strengthens the argument within the ECB that another hike in July (decision on July 23) is unnecessary, following June's 25 basis point rise to a 2.25% deposit rate, the first hike in nearly three years.

Lagarde said in Sintra that inflation and growth risks had become "more broadly balanced" than weeks earlier, and noted that Europe's economy has grown more resilient to shocks, giving the central bank more room to maneuver.

Bank of Israel: Rate Decision Monday, Expected Hold at 3.75%

The Bank of Israel announces its monthly rate decision on Monday, July 6. The current rate stands at 3.75% after a 25 basis point cut on May 25. Inflation remains within the 1–3% target range at 1.9% over the past 12 months, the tenth consecutive month inside the target zone.

Market consensus expects a hold on Monday, though some economists do not rule out another cut given moderating inflation and the strengthening shekel. The Bank of Israel's own forecasts project the rate reaching around 3.5% by end-2026.

The shekel continues to provide a tailwind: the representative rate stands at approximately 2.979 ILS per dollar and 3.394 ILS per euro, strengthening roughly 8.3% since the start of the year. This appreciation acts as an inflation dampener and gives the central bank room for further easing, but the BOI is expected to proceed cautiously.

The Bottom Line

Macro markets are navigating a complex mix: the Fed and ECB signal patience, but inflation remains above targets. In the US, the June dot plot raises the odds of another hike this year despite Warsh's neutral posture in Sintra. In Europe, June's encouraging CPI data buys the ECB breathing room, but no final verdict. In Israel, Monday's decision will test the balance between a strong shekel and contained inflation. The 10-year US Treasury yield trades around 4.49%, reflecting the tension between rate-hike expectations and signs of moderation.