BANGKOK — Federal Reserve Chairman Kevin Warsh stopped short of saying whether there would be another interest rate hike this month, while acknowledging “synchronous tightening” by central banks around the world and that there were “no free riders.”
“I’m not prejudging the meetings. I don’t believe in saying now what I might do in the meetings we have over the rest of this year,” Warsh said, reiterating his opposition to the use of forward guidance for markets that should rely on interpretation of data.
He also acknowledged that the stance could disappoint those hoping for a decision before the central bank meeting later this month. “It’s a new chapter at the Fed (and) we’re not in this business anymore. But we can go in any direction you want,” he said.
Warsh spoke during a fireside chat with International Monetary Fund Managing Director Kristalina Georgieva as part of the week-long Annual Meetings of the IMF and World Bank in Bangkok on Friday.
S&P 500 and Nasdaq futures rose slightly after the speech, while Asian stock indexes and Treasury yields remained largely flat.
Warsh described the global shift toward tighter monetary policy as a common struggle over prices. Central banks made their own choices within their own mandates, he said, but the result was “a synchronous tightening of monetary policy in most places around the world,” meaning “there are no free riders.”
Soaring energy costs resulting from the war in Iran and a boom in investment in artificial intelligence are fueling inflation and driving up borrowing costs around the world, just as global public debt is on track to exceed 100% of global GDP, a level last exceeded in the aftermath of World War II.
The US government has insisted that strong growth would be the best way out of its growing debt, rejecting the IMF’s warning that plans to rely solely on growth will not work as something that should be taken “with a grain of salt”.
Warsh also expressed optimism about how AI will make economies that use it more productive and wealthier, while warning that the road ahead could be “very rocky” and its short-term effect on employment is still uncertain.
“I want you to hear optimism from me, but optimism leavened by seriousness of purpose,” Warsh said.
Ten years from now, he said, people will look back on developments and “say this had enormous consequences.”
The Fed raised rates to a range of 3.75% to 4% last month, its first hike since 2023. Traders see a 72.3% chance for the Fed to keep the interest rate unchanged at the Oct. 27-28 meeting, according to CME FedWatch, while the majority expect a 25 basis point hike at the December meeting.
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