Warsh: Price Stability Is Key, but Fed Chair Shies Away From Signals on Rates
No forecast for coming meetings
Speaking Friday at a financial leaders’ meeting in Bangkok, Warsh said he would not prejudge the Fed’s choices at its October and December gatherings. He made the remarks during a discussion with International Monetary Fund Managing Director Kristalina Georgieva.
Warsh said the Fed had made clear its goal of price stability and had recently reduced monetary support. He added that he did not want to announce in advance what he might do at future meetings.
Inflation keeps rate debate alive
The Fed lifted its key interest rate by a quarter-point in September, bringing it to about 3.9%. The increase was its first in three years and came despite repeated calls from President Donald Trump for the central bank to cut rates.
Minutes from the Fed’s latest meeting indicated that most officials expect another increase will probably be needed this year. Higher rates can raise borrowing costs over time for mortgages, car loans and credit cards.
AI presents risks and potential
Warsh said investment tied to enthusiasm for artificial intelligence is among the forces behind higher inflation. The Fed task force focused on AI-related issues is scheduled to meet Nov. 16.
He described the technology as a major change for the U.S. and global economies, and said he expects it to bring substantial benefits over time. Warsh also suggested AI tools could help central bank economists assess inflation by analyzing more information than older models can handle.
Key points
- Warsh declined to signal what the Fed will do at its October and December meetings.
- The Fed raised its key interest rate to about 3.9% in September.
- Most Fed officials expect another rate increase will likely be needed this year.
- Warsh said AI investment is contributing to inflation but could eventually benefit the economy.