Fed's Warsh cites US resilience and AI investment surge, gives no October rate hint

Federal Reserve Chairman Kevin Warsh, speaking at the IMF and World Bank annual meetings in Bangkok on Friday, 16 October, said the US economy showed resilience and that an artificial-intelligence investment surge was creating near-term demand pressure on inflation — but he gave no preview of the late-October policy decision, Reuters reported.

What Warsh said

• He said the US and many other economies were benefiting from an “investment surge” driven by AI that was “broadening to other sectors” and putting upward pressure on inflation as a near-term demand shock.
• He called inflation a “common challenge” and said global central banks had undertaken “synchronous tightening,” adding there are “no free riders.”
• On the September US rate hike, he said: “We made very clear that we would deliver price stability, and we removed a dose of accommodation about a month ago.”

No preview of the rate path

• “I don’t prejudge meetings,” Warsh said in a discussion with IMF Managing Director Kristalina Georgieva. “I don’t believe in saying now what I might do at the meetings that we have in the balance of this year.”
• Reuters noted that most of his Fed colleagues have said more tightening is probably needed but that they want more data — a signal they were unlikely to hike again this month. Markets still bet the Fed will wait until December.

AI and growth

• Warsh called the path of AI’s impact on productivity “very bumpy,” saying it was hitting demand before supply, with uncertain employment effects over the next 12–18 months.
• A Fed AI task force will hold a field hearing in the San Francisco Bay Area on 16 November, he said.
• He added that the global economy was “showing resilience that I’m not sure I would have predicted five or six months ago.”