Fed’s Warsh sees AI boosting productivity but gives no signal on next rate hike
US Federal Reserve Chairman Kevin Warsh said in Bangkok on Friday that the global economy has proved surprisingly resilient and called AI the most consequential change of his lifetime, but gave no hint on interest rates ahead of the Fed’s meeting this month.
US Federal Reserve Chair Kevin Warsh highlighted artificial intelligence (AI) as the most significant economic shift he has witnessed during a speech in Bangkok on Friday. Speaking at the annual meetings of the IMF and the World Bank, Warsh spoke of AI's immense potential for economic growth, but also emphasized that he has no indications of an imminent Federal Reserve rate hike, scheduled for October 28th.
The US economy is showing resilience, which Warsh found surprising even five or six months ago, particularly in the US, where a surge in investments, including those related to AI, has provided a significant tailwind to the economy. Energy prices have surged since the US and Israel's conflict with Iran in late February, fuelling inflation in many economies and prompting central banks to raise rates.
In September, the Fed raised rates by a quarter point to 3.75-4%, its first hike since July 2023, aiming to achieve price stability. Warsh acknowledged that while the investment boom in AI is pushing prices up, it could also curb inflation and allow for lower interest rates. However, he warned that the future ahead is likely to be a bumpy one, both in understanding the technology and in terms of market structure.
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