Federal Reserve Chair Kevin Warsh indicated on Friday that the path for interest rates at the central bank's October and December meetings remains an open question he is not prepared to answer in advance.
Policymakers at the Federal Reserve raised the benchmark borrowing rate a quarter-point in September, bringing it to around 3.9 per cent — a tightening step not taken in three years. Persistently elevated prices across the US economy are expected to prompt further rate adjustments in the months ahead as officials work to moderate consumer demand and ease pressure on costs.
Speaking at a Bangkok gathering of financial officials alongside IMF Managing Director Kristalina Georgieva, Warsh kept his remarks close to what the Federal Reserve had already communicated — that it had delivered on price stability and pulled back a measure of accommodation roughly a month prior — while noting that he does not form judgments ahead of scheduled meetings.
The rate decision announced at the September gathering went ahead notwithstanding the president's repeated public calls for borrowing costs to be lowered, with Warsh having earlier stated that pre-committing to any particular action at forthcoming meetings was not something the institution intended to do. Warsh, whom the president had nominated to the post earlier in the year, retained the administration's backing even as it took aim at the rate-setting panel's decisions.
Inflation across the world ranks among the topics on the agenda as central bankers and financial officials gather in Bangkok. Meeting records published from the latest gathering of Fed policymakers show that a majority of members view an additional rate hike as probable before the calendar year closes. Borrowing costs tied to mortgages, vehicle financing, and credit cards would likely edge upward as a result.
Warsh attributed part of the upward pressure on prices to investment flows tied to artificial intelligence, and noted that a Fed working group on AI-related matters was scheduled to convene on Nov. 16. In his view, the arrival of this technology stands as probably the most far-reaching shift in the US and global economy within his lifetime to date.
Warsh expressed the view that, in contrast to armed conflict and other forces currently pushing prices upward, AI stands to deliver considerable benefits to the global economy over time. He pointed out that AI tools hold promise for Fed economists whose datasets frequently lag behind present-day conditions, while standard modelling approaches tend to push inflation figures through analytical structures built for an earlier economic era.
He noted that the current period of elevated prices is expected to ease before long. He also noted that central banks would have vast stores of global data at their disposal, with advanced analytical tools available to process and interpret that information.
