While the industry spent June publishing forecasts for the second half, the Federal Reserve chair declined to publish...

While the industry spent June publishing forecasts for the second half, the Federal Reserve chair declined to publish his own.

On June 17, Kevin Warsh held his first FOMC meeting as Fed Chair and refused to submit a dot plot projection, calling the practice unsuited to the current setting. Twelve days later, at the ECB’s Sintra forum, President Christine Lagarde told the same audience that forward guidance is not on the cards. Both cited the same catalyst: the Iran war, which pushed oil near $120 a barrel in March before an interim peace deal brought it back near $72, and pushed US CPI to 4.2% in May, the highest since April 2023.

Mohamed El-Erian, chief economic adviser at Allianz, noted this week that the same shock produced an array of outcomes across the G7 alone: the ECB hiked, with Lagarde flagging upside inflation risks; the Bank of Japan hiked with signals of more to come; the Bank of England held, citing pipeline inflation pressure; the Bank of Canada held; the Fed held while overhauling its own playbook through five new task forces, several staffed with outside experts. Beyond the G7, the PBoC is easing, Indonesia and the Philippines have hiked, Brazil and Hungary have cut. Fragmented Liquidity has moved from describing capital markets to describing the central banks meant to anchor them.

The compounding risk is that markets are still pricing this as one global cycle with regional lags, rather than as structural dispersion. El-Erian’s diagnosis is direct: central banks are no longer the only mechanism holding markets together, and monetary policy can’t paper over differences in fiscal capacity, labour market structure and exposure to supply chain fragmentation across economies. Left unaddressed, that produces exactly what markets should be pricing for: exchange rate stress, volatile cross-border flows, widening balance-of-payments imbalances. That is Macro-Blindness: pricing this as a problem monetary policy can solve alone, when ten central banks have already shown rate decisions can't close gaps in fiscal capacity and structural reform.

Expect H2 positioning to reward portfolios built for divergence, not for a single Fed-driven cycle. Governments, not central banks, become the swing factor, through fiscal discipline and structural reform rather than the next rate print. The open question for H2 isn’t which way the Fed moves. It’s whether your portfolio is still priced as if one central bank still moves the whole board.