Fed Chair Warsh Prioritizes Price Stability but Gives No Signal on Interest Rates
BANGKOK – Federal Reserve Chairman Kevin Warsh said Friday that he would not speculate on how policymakers might decide on interest rates at their October and December meetings.
The Fed raised its benchmark interest rate by a quarter percentage point to roughly 3.9% in September, marking its first increase in three years. With U.S. inflation still stubbornly high, policymakers may raise rates again in the coming months to restrain consumer spending and ease price pressures.
Warsh, however, provided no new clues during a “fireside chat” with International Monetary Fund Managing Director Kristalina Georgieva at a gathering of global financial officials in Bangkok.
“At the Federal Reserve, we made very clear that we would deliver price stability, and we removed a dose of accommodation about a month ago,” Warsh said. “I don’t prejudge meetings. I don’t believe in saying now what I might do at the meetings that we have in the balance of this year.”
The September rate increase went against repeated demands from U.S. President Donald Trump for the Fed to lower borrowing costs. Trump has criticized the central bank’s rate-setting committee, while continuing to voice support for Warsh, whom he appointed earlier this year.
The worldwide rise in prices remains a central concern for policymakers and finance officials gathered in Bangkok.
Minutes from the Fed’s latest meeting showed that most officials believe another rate increase will probably be necessary before the end of the year. Higher rates would gradually increase borrowing costs for mortgages, auto loans and credit cards.
Warsh also pointed to the investment boom fueled by enthusiasm for artificial intelligence as one contributor to inflation. The Fed’s task force examining AI-related issues is scheduled to meet Nov. 16.
“I’d say the advent of this new technology is probably the most consequential change to the U.S. and the global economy in my lifetime to this point,” he said.
Unlike armed conflicts and other disruptions that push prices higher, Warsh said he expects AI ultimately to deliver a “huge benefit” to the global economy.
He added that artificial intelligence could become an important resource for Fed economists, who often must assess the economy using data that trails rapidly changing conditions.
“We torture data with old fashioned models to try to find out what’s underlying inflation trends. Not so long from now, it won’t be torture. We will have access at the fingertips of central banks to all the information in the world, and we’ll be able to use new analytical tools to distill that data,” he said.
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AP Economics Writer Christopher Rugaber in Washington and AP journalist Haruka Nuga in Bangkok contributed to this report.
