(The opinions expressed here are those of the author, a columnist for Reuters.)

LONDON - The Federal Reserve's quarterly "dot plot" rate forecasts may soon lose their last projected rate cut, the so-called easing dot, and the plot itself could possibly disappear altogether. Then markets would have to work out whether Kevin Warsh is really the inflation hawk he once purported ​to be. If he is, that might yet ⁠prove a shock for some investors.

The new Fed chair is busily setting out his stall and dutifully consulting staff before his first policy meeting later this month. None of the guidance he gets on policy direction will ‌offer easy answers.

An eye-popping AI investment boomand red-hot energy price pressures from the three-month war in Iran have pushed inflation far above target. Together with shifting sands within the Fed's policymaking council, that has spooked futures markets into pricing the Fed's next interest rate move as up, possibly ​by year-end.

One of the few arguments left for the doves in recent months has been that cracks may appear in the labor market - the other side of the Fed's dual mandate - and potentially be exaggerated by AI-related job shedding or energy-related corporate cutbacks. There's very little sign of ​that ​yet.

If anything, the labor market looks robust, possibly even strengthening. April's sharp jump in job openings and May's above-forecast 122,000 private-sector job gains point that way, if taken at face value. May's national employment report is due on Friday and will put that picture to the test.

The Fed's not going to raise rates this month, but it may start to sow the seeds.

Aside from any signal Warsh sends at his press conference, markets will ⁠focus hard on any removal of language in prior Fed statements indicating a bias to ease again. Three policymakers already voted to remove it last time out, and at least one recently dovish board member, Christopher Waller, has joined them since.

But Fed policymakers' quarterly update of economic projections, including the "dot plot"showing where they see interest rates in coming years, may steal the show.

The existing median of views is for another cut this year and one more in 2027.

Soundings from Fed officials since March suggest this year's projected cut is likely to disappear from the plot. Whether 2027 goes with it, or even chimes with market pricing for a hike, may pack the biggest market punch.

The irony, of course, is that Warsh's distaste for so-called forward guidance may ​well see him try to scrap the 'dot ‌plot' entirely. He would have plenty ⁠of support for that - including from his predecessor, ⁠Jerome Powell, who remains on the board.

Wiping further easing from the horizon, then turning out the lights and leaving markets to make up their own minds from incoming data, could make for an edgier and more volatile interest rate market through the second ​half of the year.

To be sure, some investors still cling to hopes that an eventual end to the Iran war will bring easing back onto the radar, or feel that the ‌real income effects of the energy squeeze will depress household demand enough to keep other prices in check.

But plenty of others feel the worm has ⁠turned.

RATE CUTS EXIT STAGE LEFT

SGH Macro economist Tim Duy reckons the inflationary consequences of higher energy prices now dominate the growth impacts, and that positions are shifting rapidly within the Fed's policymaking council as it begins to see its last cut in December as an error.

"Realizing the increasing risk that monetary policy is not in a good place, Fed speakers are rapidly shifting in a hawkish direction and setting the stage for a rate hike," he said.

"The old Warsh would bring forward rate hikes," he added in reference to Warsh's long-standing reputation as a monetary hawk, even if he adopted softer tones while seeking a job from a president who favored lower rates.

"No one knows which Warsh will be on stage."

Notably, Warsh this week hired President Donald Trump's former budget director and Heritage Foundation economist Paul Winfree as one of two advisers to help with his transition to the chair.

Winfree, credited with authoring the Fed chapter of the Project 2025 conservative election manifesto in 2023, had a wish list of reforms that included removing the Fed's maximum employment mandate and focusing the central bank solely on inflation.

That would have to go to Congress, of course.

But depending on whose advice Warsh takes, his view of the current situation may not prove as dovish as many had assumed a Trump appointee's would be. The president has already said he will let him do his own thing.

As the economy and stock markets heat up on ‌this blistering AI investment boom, despite headwinds from energy, geopolitics and tariffs, many question why the Fed would even consider easing again.

Even though borrowing markets ⁠have tightened over recent weeks, the stock market surge has seen Goldman Sachs' measure of overall U.S. financial conditions drop to its loosest in four years. Citi's U.S. ​economic surprise index, meantime, is at its most positive in three years.

Harking back to the error of Fed cuts into the late 1990s dotcom investment surge, Carlyle strategist Jason Thomas opined: "Rate cuts delivered during a concentrated capex boom tend to prove far more stimulative than rate cuts arriving in other circumstances."

Thomas contrasted the sheer scale of computing capex now with the dotcom era and pointed out that real short-term interest rates now sit more than 300 basis points below what they were back then.

"It's long past time to abandon the ​endemic easing bias," he concluded.

Warsh's rethink and ‌reset may not be the one many assumed.

(The opinions expressed here are those of Mike Dolan, a columnist for Reuters.) Enjoying this column? Check out Reuters Open Interest (ROI), your ⁠essential new source for global financial commentary. Follow ROI on LinkedIn, and X. And listen to the Morning ​Bid daily podcast on Apple, Spotify, or the Reuters app. Subscribe to hear Reuters journalists discuss the biggest news in markets and finance seven days a week.

(by Mike Dolan; Editing by Marguerita Choy)