Federal Reserve Chairman Kevin Warsh declined to endorse or push back on colleagues' recent signals that officials are in no rush to raise interest rates this month, saying the central bank was no longer in the business of previewing its decisions.
"I don't prejudge meetings. I don't believe in saying now what I might do at the meetings we have in the balance of this year," Warsh said. "It's a new chapter at the Fed, and we're not in that business anymore."
Warsh made the comments Friday morning local time in Bangkok in a moderated conversation at the meetings of the International Monetary Fund and shortly before Fed officials were set to enter their quiet period ahead of the Oct. 27-28 meeting. He spoke with IMF Managing Director Kristalina Georgieva.
The Fed raised rates by a quarter percentage point last month, to a range between 3.75% and 4%, in a unanimous vote. It was the first increase in three years, and most of Warsh's colleagues penciled in at least one more rate increase this year in projections released at the meeting.
Warsh said the world had "broadly conformed to our expectations" since the September meeting. He was upbeat about the economy's prospects, saying the "massive investment surge" in the U.S. "isn't by accident" but instead reflects good economic policy. The investment surge "isn't just AI," he said, and is broadening, which is giving the economy greater "strength and durability."
He said the AI build-out would ultimately be a positive supply shock, which increases the economy's capacity to produce more goods and services without necessarily pushing up prices. But he added, "On the path to that positive supply shock, we're seeing increases in aggregate demand. That just is what it is."
Some of Warsh's colleagues have more directly tied the AI build-out to recent price increases that could justify even higher rates. Warsh stopped short of that, describing the extra demand as a byproduct of a transition he expects to pay off.
Warsh has said that he wants investors to focus on the economy rather than hints from Fed officials about their next moves, but two weeks ago, top officials who consult with Warsh on policy strategy signaled the central bank was in no hurry to raise rates again this month. Odds of an October rate increase in futures markets tumbled shortly thereafter.
September inflation data released this week, however, was firmer than expected. Core consumer prices, which exclude volatile food and energy items, rose 0.33% in September, the second straight firm monthly reading. A separate measure of producer prices released Thursday was also strong.
The Fed's October meeting will fall less than a week before the midterm elections, which means any decision to raise rates or hold them steady could draw more political scrutiny than normal.
Warsh said little about this week's inflation reports, and he made no apparent effort to shift investors' expectations about the October meeting, which prior to his remarks anticipated slightly greater than a one-in-four probability of a rate increase.
Instead, he described inflation in general terms as a problem shared by many countries. Central banks' recent responses, each made on their own terms, amounted to "a synchronous tightening in monetary policy in most places around the world," he said. "That means there's no free riders."
Central bankers sometimes treat synchronized tightening as a risk because everyone raising rates at once can compound the drag on global growth. Warsh's framing instead cast the Fed's September rate increase as part of a broader global frame rather than a lone hawkish turn.
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