Fed chair KEVIN WARSH said the labor market is stable and demand remains
strong; he declined to say whether the Fed will hike in July, saying the move
will be fully debated. He prefers a smaller Fed balance sheet, will chart a new
policy path, reaffirmed no short-term forward guidance but will keep the dot
plot, and noted inflation expectations and risks have eased in recent weeks
while committing to return inflation to 2%. Possible working-group head
appointments next week; aims for real‑time data–driven policy within a year. AI
is driving a capex surge and stronger demand, but its inflationary impact is
still unclear. Bank of England governor BAILEY said energy prices have fallen,
forward guidance becomes problematic over time, and activity and the labor
market are slowing with an expanding output gap. He wants to remove
interest‑rate risk from the BoE balance sheet, sees no case for cuts now and
says policy has tightened even without further hikes. ECB president LAGARDE said
Europe is not in stagflation, noted EU–US interdependence on AI, expressed
regret about past constraints from forward guidance, and judged euro‑area
Inflation and growth risks more balanced than a few weeks ago. Bank of Canada
governor MACKLEM said the Canadian economy is weak, equities look richly valued,
and inflation remains clearly above target; the BoC will keep inflation
expectations anchored. The BoC’s balance sheet is at a new steady state. The
timing of any AI‑driven disinflation is uncertain and short‑term computer prices
have risen. Policy sits near the lower bound of neutral and is roughly at a
level to curb inflation; officials stand ready to act if conditions change.
