Shekel Weakens as Dollar Climbs Above 2.99 and ECB-Style Fed Comments Calm Markets

The shekel weakened in the last trading session of the week in the foreign-exchange market, after a night of declines on Nasdaq and a pullback in Wall Street futures. As U.S. stocks fell, Israeli institutional investors were forced to rebalance portfolios, which in practice means buying dollars. The dollar rose 0.5% to above 2.99 shekels, while the euro gained 0.5% to around 3.40 shekels.

In global markets, the dollar index was little changed at 101.4 points. The euro was steady just below $1.14, and sterling was also stable at $1.32.

Two senior Federal Reserve officials, Chicago Fed President Austan Goolsbee and New York Fed President John Williams, struck a cautious note about inflation easing, while saying they do not expect an imminent shift in interest-rate policy. Goolsbee said inflation is still moving in the wrong direction, even if there have been some encouraging signs. Later, Williams said he expects inflation data to again show moderation.

In a CNBC interview, Goolsbee declined to say where rates are headed, but stressed that inflation remains his focus, echoing the message delivered a week earlier by the new Fed chair, Kevin Warsh. “We have seen some improvement in services inflation, and that is exactly the figure we hoped to see,” Goolsbee said. “But right now, of the Fed’s two mandates, inflation and the labor market, the problem is clearly on the inflation side.” He also welcomed Warsh’s decision to reduce the use of forward guidance, saying, “We need to simplify the messages, reduce forward guidance and not raise speculation about the path of rates. I think that change is healthy.”

Williams, speaking at the Crane Money Fund Symposium in his first remarks since last week’s Fed meeting, said he is satisfied with the current interest-rate level and does not yet see enough progress to discuss cuts. He said inflation must keep moving back to the 2% target, and argued current policy is “well positioned” to do that. He sees three forces helping: the fading impact of tariffs, hopes that the war with Iran is nearing an end and energy prices will fall, and slower housing inflation as rent increases ease. He forecast inflation falling to 3.5% this year from 4.1% now, then moving gradually toward 2% by 2028. He added, “Like in a World Cup tournament, the economy can also develop in surprising and unexpected ways. But one thing is certain, my commitment to support maximum employment and return inflation to the 2% target in a sustained way is unwavering.”

The Fed’s next rate decision is due on July 29, and markets currently assign a 30% chance of a cut at that meeting. Goolsbee does not have a vote on this year’s rate committee, but will gain voting rights in 2027. Williams has a permanent vote as head of the New York Fed.