Federal Reserve Chair Kevin Warsh said on Oct. 16 that he would not prejudge the outcome of the Fed’s two remaining rate meetings this year and would not disclose possible actions in advance while speaking in Bangkok during an International Monetary Fund meeting, according to BlockBeats.
"This is a new chapter for the Federal Reserve. We don’t do that anymore," Warsh said. He neither endorsed nor pushed back against recent signals from colleagues that there is no urgency to raise rates this month.
No advance signal on the next rate step
Warsh reiterated that the Federal Reserve will achieve price stability. He also said the global economy has, on the whole, tracked broadly in line with central bank expectations since the September rate increase. He described recent moves by central banks as synchronized monetary tightening across most parts of the world.
In September, the Fed unanimously raised rates by 25 basis points, lifting the federal funds target range to 3.75% to 4%. At that time, most officials expected at least one more rate increase before year-end.
Even though core CPI in September rose 0.33% month over month for a second straight month of firm gains, and the latest producer price data also came in strong, Warsh barely addressed this week’s inflation reports and did not appear to make a clear attempt to shift market expectations for the October meeting.
Market pricing eased, but no decision has been made
The report said the U.S. dollar weakened during Warsh’s remarks, while market bets on an October rate hike fell from about 30% to about 17%.
As a policy signal, his remarks were seen as leaving room for decision-making rather than clearly turning dovish. Warsh did not preview another rate increase, but he also did not promise an end to tightening or a pivot to rate cuts. The speech extended the Fed’s recent approach of reducing forward guidance, and market bets on an October pause should not be read as a formal decision by the central bank.
Comments on investment, resilience and AI
Beyond rates, Warsh said the United States is going through a period of large-scale investment growth. He also expressed optimism about economic resilience and productivity gains from artificial intelligence. At the same time, he warned that the road ahead would be "very bumpy" and said AI’s short-term effect on employment remains unclear.
Analyst reaction
DBS Bank macro strategist Wei Liang Chang said: "Hearing Warsh reaffirm his belief that artificial intelligence will raise productivity over the medium term could help ease inflation expectations and reduce concern about consecutive Fed rate hikes, which may reassure markets. The U.S. dollar and Treasury yields could edge lower, but broader price action will still depend on whether U.S. equities stay stable tonight."
Charu Chanana, chief investment strategist at Saxo Markets, said: "Warsh’s refusal to commit to another rate hike caused some Fed hike bets to unwind. After strong inflation data, his comment that ‘I will not prejudge the meeting’ did not help the dollar."