As the dollar nervously reacts to Trump's latest statements on the Middle East, many experts and economists are discussing how Kevin Warsh's arrival at the Federal Reserve on May 18 could shape the central bank's future policy.

The discussion revolves around the tone and the accuracy of the central bank's forecasts, given the economy's inherent unpredictability. During his Senate hearings, Warsh expressed concern over how often Fed officials state that the search for truth is more important than repetition.

According to CNN, Warsh suggests introducing a "new framework" and "new tools" for communication, though details were not disclosed. However, it is clear that any reduction in press conferences or a refusal to issue quarterly dot plots would represent a significant shift for an institution that has built its reputation on transparency over the past three decades. Former Fed Chair Powell was an advocate for more open and frequent statements and press conferences, allowing traders to understand and analyze the central bank's future steps in detail. A more closed and rare format for such meetings and statements would clearly not benefit the market.

Loretta Mester, a representative of the Fed, stated in a recent interview: "Warsh is right about the Fed's forecasts. It is important not to be tied to one viewpoint—that is why the committee constantly says that forecasts are not commitments." However, in her opinion, communication is not a trivial matter. "You are speaking with market participants, the public, Congress—but perhaps there is a way to do this more effectively."

It is also important to understand that, given the situation in the Middle East, Warsh has limited scenarios to consider.

In a recent speech, Warsh mentioned that he is "not bound by prior commitments" regarding any course of action. However, the key factor influencing his behavior remains how long the conflict lasts and how strongly it affects energy prices.

Here are several possible scenarios:

Scenario 1: "Wait-and-see Position" (Base Case)

In the case of limited and brief military confrontations that do not lead to a sustained rise in oil prices, Warsh is likely to maintain the Fed's current pause. This is the most probable base case for the first meeting on June 16 and 17. The conflict only adds to the uncertainty around energy prices and inflation, reinforcing the central bank's "wait-and-see" stance.

Scenario 2: "Forced Easing" (in the event of recession)

A prolonged conflict could combine inflationary pressures from rising energy prices with weakening economic activity—a so-called stagflation scenario. In such a situation, analysts expect Warsh to advocate a more aggressive rate cut to stimulate the economy, despite inflationary risks. However, such a move would likely face resistance from more hawkish FOMC members, such as Lorie K. Logan or Beth Hammack, leading to division within the committee.

Scenario 3: "Forced Tightening" (in the event of an inflation shock)

Currently, this scenario is the most realistic. If the conflict leads to a prolonged disruption of shipping through the Strait of Hormuz and a sustained spike in energy prices, inflationary pressure could become critical. In this case, the Fed may have to consider not cutting rates but raising them to tame inflation, despite the potential economic downturn. Traders are already pricing in not only a pause but also the probability of one rate hike by the end of the year. Such a scenario would be Warsh's "worst nightmare," as his campaign promises focused on easing policy.

As mentioned above, the first FOMC meeting chaired by Warsh will take place on June 16 and 17.