"Not going to prejudge": Fed Chair keeps rate outlook open; calls AI "positive supply shock"
Bangkok Octobe, r 16
Federal Reserve Chairman Kevin Warsh has refrained from signalling the central bank's next interest-rate move, saying he would not "prejudge" policy decisions, while describing artificial intelligence as a "positive supply shock" for the economy over the medium term.
During a fireside chat at the 2026 Annual Meetings of the International Monetary Fund (IMF) and the World Bank Group, the Fed Chair said the United States is witnessing a massive surge in investment, although the trend is not equally visible across countries, challenging the theory of "secular stagnation", which suggests that prolonged economic weakness is "inevitable".
His remarks come amid expectations among major brokerages of a potential rate hike in December, while markets broadly anticipate the Federal Reserve will keep short-term interest rates unchanged at its October 27-28 meeting.
Highlighting uncertainties surrounding the economic outlook, he added, "We certainly want to know what 2027 and 2028 are about, but none of us are perfect forecasters." Warsh said, stressing, "I'm not going to prejudge FOMC meetings; I'm going to try not to prejudge."
On the global economic outlook, Warsh said developments over the past month had broadly aligned with the Federal Reserve's expectations, adding that the central bank would reassess economic conditions at its upcoming October and December policy meetings.
"Obviously, the Federal Reserve and our policies spill over to the rest of the world, but their (11:38) policies spill back to us, too."
Warsh also reflected upon increasing usage of AI, adding, "The advent of this new technology is probably the most consequential change to the US and the global economy in my lifetime to this point."
The Fed chair acknowledged that AI is "hitting the demand side of the economy before it's going to hit the supply side of the economy." Hence, central bankers and businesses trying to ensure stable prices and full employment have to recognise this as a "shock".
However, he noted, "It's a positive supply shock in the medium term...I do fundamentally believe that."
The Fed Chair also said that the central bank would hold its first field hearing of a task force on November 16. "We're going to have our first field hearing of a task force on November 16th," he said.
— ANI
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