Speaking during the International Monetary Fund and World Bank annual meetings in Bangkok, Warsh said policymakers remained committed to price stability but would not announce their decisions before the Federal Open Market Committee meets on 27 and 28 October.
Traders reduced the probability of an increase at that meeting from about 27 per cent before his appearance to below 15 per cent afterwards. US stock futures advanced and the dollar weakened modestly as investors interpreted his restraint as consistent with leaving borrowing costs unchanged.
The Fed raised its benchmark interest rate by a quarter percentage point in September, its first increase since 2023, taking the target range to 3.75 to 4 per cent. All 19 policymakers supported the move, while a majority anticipated another increase before the end of the year.
Warsh said the central bank had already withdrawn some support from the economy through September’s decision. He stressed that officials would assess conditions at each meeting rather than commit publicly to a predetermined sequence of interest rate changes.
“I don’t prejudge meetings,” he said. “I don’t believe in saying now what I might do at the meetings that we have in the balance of this year.”
His comments followed stronger than expected US inflation figures that had prompted investors to reassess the prospect of another rise this month. September producer prices increased by 1.3 per cent, while consumer price inflation also exceeded forecasts, renewing concern about persistent pressures on household and business costs.
Warsh nevertheless indicated that economic developments had not materially departed from the central bank’s September assessment. He said the world had broadly conformed to policymakers’ expectations since their previous gathering, without suggesting that the latest inflation figures demanded immediate action.
The distinction matters because officials are seeking to prevent inflation becoming entrenched while avoiding unnecessary disruption to employment and economic activity. Holding rates steady in October would give them additional time to evaluate whether September’s increase is restraining demand sufficiently.
Goldman Sachs economists said Warsh’s remarks, together with statements by other policymakers, pointed towards an October pause. They continued to anticipate a further quarter-point increase in December, although that forecast remains conditional on incoming economic evidence.
Derek Tang, an economist at Monetary Policy Analytics, said the chairman had offered little that investors could interpret as a signal favouring an immediate increase. The absence of a firmer warning helped reduce expectations of tightening at the next meeting.
Several Federal Reserve officials have maintained that further increases may prove necessary to restore inflation to the institution’s 2 per cent objective. They have also emphasised that decisions should depend on economic figures rather than market pressure or a fixed timetable.
Warsh’s appearance came as the Fed faced competing concerns over rising prices and the consequences of rapid investment in artificial intelligence. The chairman described the technology as an exceptionally important economic development, while cautioning that its immediate effects could differ from its longer-term benefits.
He said investment in artificial intelligence was lifting demand before corresponding improvements in productive capacity had fully emerged. That imbalance could complicate the inflation outlook, even if technological advances eventually allow businesses to produce more goods and services at lower cost.
The implications for employment were less certain, Warsh acknowledged. Increased productivity could change the demand for workers across industries, making it important for policymakers to distinguish temporary disruptions from more durable changes in the economy.
He said central bankers needed to approach the technological shift seriously and responsibly because their responsibilities included maintaining stable prices and maximum employment. Some Fed officials have likewise questioned whether heavy spending on computing infrastructure could add to overheating pressures.
Warsh also announced that the Fed’s task force examining productivity and jobs would hold a field hearing in the San Francisco Bay Area on 16 November. The group is among five task forces established to review economic and institutional questions, with recommendations expected late this year or early in 2027.
The planned hearing will examine how technological advances affect productivity and employment, issues increasingly relevant to monetary policy. Its findings will contribute to the Fed’s wider assessment of structural economic changes, alongside conventional indicators of inflation, wages and consumer demand.
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