Warsh signals steady Fed outlook despite inflation jump

Federal Reserve Chair Kevin Warsh announced on Friday that the economy has largely met expectations since the September rate hike, suggesting minimal changes to the central bank's outlook. The Fed is considering another interest rate hike later this month as inflation intensifies and the economy continues to perform well.

Warsh remarked at the IMF and World Bank annual meetings in Bangkok that the global economy has largely adhered to the Fed's expectations since September's meeting. He clarified that he refrains from predicting meeting decisions in advance and does not predict actions for upcoming policy meetings.

During a conversation with IMF Managing Director Kristalina Georgieva, Warsh echoed concerns about rising prices, indicating that international counterparts shared similar sentiments. He also discussed discussions with fellow central bankers in Bangkok.

The latest data revealed that inflation surged in September, with price pressures spreading from energy into services. This led to an increase in the odds of an October rate hike from 22% to 50%, according to CME FedWatch. However, this figure dropped to 28% by Thursday afternoon.

Warsh acknowledged that AI is driving spending ahead of its long-term productivity gains. He highlighted the significant investment surge in AI, calling it "probably the most important thing that's happening in the global economy on the upside." However, he cautioned that the AI transition would be a "very bumpy" process.

Warsh unveiled plans for the first field hearing of the Fed's productivity and jobs task force, set for November 16 in the Bay Area. This task force, one of five established by Warsh upon taking office, aims to explore how AI and other technologies are transforming the economy.