Fed Chair Warsh Reaffirms Commitment to Price Stability Ahead of October Rate Decision
Federal Reserve Chair Kevin Warsh said the central bank remains focused on achieving price stability as inflation stays above target, and previewed an upcoming productivity task force hearing.
Federal Reserve Chair Kevin Warsh said the central bank remains committed to delivering price stability as it approaches its October 28 interest-rate decision. He noted that the economy has performed largely as expected after the Federal Open Market Committee raised the short-term rate target range to 3.75%-4% last month. Recent data showed year-over-year consumer-price inflation at 3.7% in September, above the Fed’s 2% goal.
Warsh declined to indicate how the committee will vote at the upcoming meeting, while market participants expect rates to hold steady in October and possibly rise in December, according to CME FedWatch.
"It's hard to be in a discussion with central bankers and not compare notes and hear the same thing about the surge in prices," Warsh said during a fireside chat in Bangkok with IMF Managing Director Kristalina Georgieva on Oct. 16. "At the Federal Reserve, we made very clear that we would deliver price stability."
The two officials also discussed artificial intelligence, which Warsh described as "probably the most important thing that's happening in the global economy on the upside." He said AI could boost demand for components such as memory chips, creating short-term inflationary pressure, but may enhance productivity and reduce inflation over the longer term. The impact on employment, he added, remains uncertain for the next 12-18 months.
"If you believe, like I believe, which is: it will make economies and countries that put it to good use more productive, that it's going to make it so that we will have more wealth, then that has to be a very good thing," Warsh said. "But the path from where we are to there is likely to be a very bumpy one."
Warsh announced that the Fed’s productivity and jobs task force, one of five created this year, will hold its first field hearing in the Bay Area on Nov. 16 to examine these issues.
"I'm pretty sure I've got the right questions," he added. "Not sure I have the right answers."