Fed Chairman Warsh Withholds Rate Signal, Highlights Global Tightening
Warsh said no forward guidance, praised worldwide tightening, and warned AI path will be bumpy.
Key facts
- Warsh refrained from indicating a rate hike for the October meeting.
- He praised synchronous tightening by central banks worldwide.
- Warsh opposed using forward guidance for markets.
- He said AI development will be bumpy and employment impact uncertain.
- The Fed raised rates to 3.75%-4% last month, its first hike since 2023.
According to CNBC, Warsh spoke at the IMF‑World Bank meeting in Bangkok and said he would not pre‑judge future Fed meetings.
He said the Fed will not use forward guidance and that markets should interpret data instead.
Warsh praised the global shift toward tighter monetary policy, noting there are no free riders and that central banks made choices under their mandates.
He expressed optimism about AI but warned the path will be bumpy and its near‑term effect on employment is uncertain.
S&P 500 and Nasdaq futures edged higher after the speech, while Asian indexes and Treasury yields remained largely stable.
The Fed raised rates to a 3.75%-4% range last month; traders see a 72.3% chance of keeping the rate unchanged at the Oct. 27‑28 meeting, and a majority expect a 25‑basis‑point hike in December.
Context
The Fed is balancing inflation and growth. Global central banks are tightening to fight inflation, driven by energy costs and AI investment. The Fed’s recent hike to 3.75%-4% marks its first increase since 2023.
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