Do You Know? Federal Reserve Chair Kevin Warsh has declined to say whether the central bank will raise interest rates again at its October meeting, leaving markets to interpret incoming economic data.
What happened
Warsh spoke Friday in Bangkok during a fireside chat with International Monetary Fund Managing Director Kristalina Georgieva at the IMF-World Bank Annual Meetings. He said he would not prejudge meetings scheduled for the remainder of the year and reiterated his opposition to forward guidance that tells markets what policymakers may do before reviewing the data.
“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,” Warsh said.
He acknowledged that investors and other observers seeking an indication ahead of the Fed’s later-October meeting could be disappointed. “It’s a new chapter at the Fed [and] we’re not in that business any more,” he said.
Why it matters
The Fed’s decision is being watched alongside a broader shift toward tighter monetary policy in much of the world. Warsh described that shift as “synchronous tightening,” saying central banks acted under their own mandates but reached a similar policy direction in response to price pressures.
“There’s no free riders,” Warsh said.
The source reported that the Fed raised its target interest-rate range to 3.75% to 4% last month, its first increase since 2023. The next policy meeting is scheduled for Oct. 27-28, according to the report.
Market expectations and reaction
According to CME FedWatch data cited by CNBC, traders saw a 72.3% chance that the Fed would leave rates unchanged at the October meeting. The source said the majority expected a 25-basis-point increase at the December meeting. Those figures represent market expectations, not a commitment by the Federal Reserve.
S&P 500 and Nasdaq futures edged higher after Warsh’s speech, while Asian stock indexes and Treasury yields were largely stable, the source reported.
Warsh’s outlook on AI and the economy
Warsh also expressed optimism that economies using artificial intelligence effectively could become more productive and wealthier. He cautioned, however, that the transition could be “very bumpy” and said AI’s near-term effect on employment remains uncertain.
“I want you to hear from me optimism, but optimism leavened by the seriousness of purpose,” Warsh said.
He added that people could look back a decade from now and view the developments as highly consequential.
What happens next
The Federal Open Market Committee is due to meet on Oct. 27-28. Warsh did not provide a rate signal for that meeting, so the source indicates that traders will continue assessing economic data and comments from Fed officials.
Bottom Line
Warsh offered no advance guidance on the Fed’s next rate decision. His comments instead emphasized data-dependent policymaking, coordinated global efforts to contain price pressures and uncertainty surrounding the economic and employment effects of AI.
Source
This report is based on information published by CNBC Business.
