Federal Reserve Chair Kevin Warsh said he will not prejudge how the U.S. central bank will adjust interest rates at its upcoming policy meetings. He nonetheless repeatedly pledged to "deliver price stability."
Warsh made the remarks on Friday on the sidelines of the International Monetary Fund and World Bank meetings in Bangkok. Surging prices worldwide were a key concern for the finance officials gathered there. With U.S. inflation remaining elevated, the market widely expects the Fed to raise its benchmark rate again in the coming months after its September hike.
Fed Chair Kevin Warsh said on Friday that he will not predetermine the Fed's rate moves at its upcoming meetings in October and December. The Fed raised its benchmark rate by 25 basis points in September to about 3.9%, its first hike in three years. With U.S. inflation persistently high, the Fed is highly likely to raise rates again in the coming months to curb consumption and ease upward pressure on prices. But at the Bangkok gathering of finance officials, Warsh did not release any new policy signal during a fireside chat with IMF Managing Director Georgieva. "The Fed has made clear that we will deliver price stability, and about a month ago we withdrew some of our accommodation," Warsh said. "I will not prejudge the outcome of the meetings. I do not favor signaling now what I might decide at the remaining meetings this year."
The Fed's September rate hike went against repeated calls by U.S. President Trump for lower rates. Although Trump has criticized the Fed's rate committee, he still voiced support for Warsh, whom he nominated earlier this year. Broad global price increases are a common problem for the central bank governors and finance officials gathered in Bangkok. Minutes of the latest policy meeting showed that most Fed officials believe another rate hike is likely needed this year. Over time, that will push up borrowing costs for mortgages, auto loans and credit cards.
Warsh noted that an investment surge driven by the artificial intelligence boom is one factor pushing inflation higher; the Fed's dedicated working group on AI-related issues will meet on November 16. "I would say the arrival of this new technology may be the most far-reaching change for the U.S. and global economies that I have witnessed in my lifetime," he said. Warsh said that, unlike shocks such as conflict that drive prices higher, AI will eventually bring "enormous benefits" to the global economy over time. He also said it is very difficult for Fed economists to forecast the economy using data that lags reality, and that AI is expected to become an important tool. "We have been repeatedly digging through data with traditional models to try to gauge underlying inflation trends. Before long, that difficult digging will no longer be necessary. Central banks will have all the world's information at their fingertips and will distill the data with entirely new analytical tools."
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