Foreign exchange markets were calm ahead of the Federal Reserve’s policy decision. In Israel, the dollar traded above 2.91 shekels and the euro above 3.38 shekels. Globally, the dollar index was unchanged at 99.5, the euro held just above $1.16, and the pound stayed above $1.34 as traders looked ahead to UK May inflation data later in the day and the Bank of England’s rate announcement tomorrow.
The Fed’s Federal Open Market Committee is widely expected to leave interest rates unchanged at its first meeting under new chairman Kevin Warsh, who took office less than a month ago on May 22. Market attention will focus on Warsh’s first press conference and the Fed’s updated rate outlook, known as the dot plot, which is part of the broader Summary of Economic Projections and also includes forecasts for growth, unemployment and inflation.
The Fed publishes the dot plot quarterly, and it is not an official central bank forecast, but the midpoint of policymakers’ individual projections. Most economists think Warsh will not publish his own forecast, partly because of how little time he has been in the job, but mainly because he has criticized the Fed’s practice of releasing forecasts and what he calls excessive communication.
During his Senate confirmation process, Warsh said the Fed tells the world in advance what its dots and forecasts will be, then stays attached to them for too long. He argued that waiting until the meeting to decide could prevent the central bank from deepening its mistakes. Analysts said skipping a personal forecast would be unusual and would break a roughly 14-year practice that has existed since the global financial crisis. Bill English, a former head of the Fed’s monetary affairs division, said it seemed quite plausible that Warsh would avoid giving a rate forecast. Aditya Bhave of Bank of America and David Mericle of Goldman Sachs also said they expected Warsh not to submit dots, though Mericle said there is still uncertainty.
