Fed Chairman Kevin Warsh Withholds Signal on October Interest Rates

Federal Reserve Chairman Kevin Warsh declined to signal whether the central bank will raise interest rates again this month during a financial summit in Bangkok, while noting that global central banks have engaged in a synchronous tightening of monetary policy to combat inflation.

Federal Reserve Chairman Kevin Warsh walked a fine line during a high-profile appearance at the annual meetings of the International Monetary Fund and the World Bank, refusing to offer any guidance on whether borrowing costs will climb further at the upcoming October meeting. Speaking at a fireside chat alongside IMF Managing Director Kristalina Georgieva, Warsh reiterated his opposition to giving markets explicit forward guidance about monetary policy decisions. Since Warsh took his post in May, the central bank has either held rates steady or increased them, with the Federal Open Market Committee having raised the federal-funds rate last month by a quarter-point to about 3.9%, marking its first increase in three years.

I don’t prejudge meetings. I don’t believe in saying now what I might do at the meetings that we have in the balance of this year.

Kevin Warsh, Federal Reserve Chairman

That reluctance to telegraph moves left market watchers guessing about the central bank’s next steps. Goldman Sachs economists led by Jan Hatzius noted that Warsh’s commentary, combined with recent remarks from other Federal Open Market Committee participants, suggests the FOMC is poised to pause in October before potentially delivering a second and final hike in December. Traders tracking the CME FedWatch tool currently price in a probability that the Fed will leave interest rates untouched at the October 27–28 policy gathering, while the majority expect a 25 basis point hike at the December meeting. Following his speech, stock market indexes in Asia and Treasury yields were largely stable, while S&P 500 and Nasdaq futures edged higher. The Dollar Index moved nearly 1% down across two days, departing from recent post-tariff highs, as implied probabilities of a hike fell below 15% after his remarks.

Advanced Economies Tighten Monetary Policy in Tandem

Beyond domestic policy, Warsh expressed surprise at the unexpected durability shown by economies worldwide in the face of persistent energy shocks and aggressive monetary intervention. He pointed out that advanced economies fighting surging inflation have effectively acted in tandem, resulting in a synchronous tightening in monetary policy in most places around the world.

If I look back over the last few months, while we each did the right thing by our own judgement, by our own remit, it was a synchronous tightening in monetary policy in most places around the world, and that means there’s no free riders.

Kevin Warsh, Federal Reserve Chairman

That coordinated tightening comes as surging energy expenses driven by the Iran conflict and an artificial intelligence investment boom stoke global borrowing costs. Public debt across major nations is on pace to exceed 100% of the world’s GDP, reaching a level last breached in the aftermath of World War II. Banque de France Governor Emmanuel Moulin noted during the meetings that rising bond yields in France are effectively helping the European Central Bank tighten financial conditions, whereas ECB chief Christine Lagarde stated earlier in the week that France must address its rising bond yields on the fiscal side without central bank assistance.

Inflation Pressures and the Artificial Intelligence Investment Surge

Back home, the economic backdrop remains complex. Consumer and producer price indexes released by the Bureau of Labor Statistics show that producer prices experienced their largest monthly gain in over four years in September, while consumer prices rose 3.7% from a year earlier, up from a peak of 4.1% in May. Core consumer prices, which exclude volatile food and energy categories, climbed 2.6%, ticking up from 2.4% in August. Federal Board member Neel Kashkari recently told CNBC that inflation is still too high, while President Donald Trump has continued his yearslong pressure campaign to push the central bank to cut rates. Unlike his frequent attacks on former Chair Jerome Powell, Trump has not attacked Warsh since his appointment.

Despite the near-term inflationary bump, Warsh remained fundamentally optimistic about the technology’s long-term promise, calling it the most consequential change to the U.S. and the global economy in his lifetime. He noted that the Federal Reserve has convened a dedicated task force to evaluate the productivity and employment implications of artificial intelligence, with a public field hearing scheduled to take place in the San Francisco Bay Area and an upcoming task force meeting set for November 16.