Fed's Warsh upbeat on US economy but silent on rate path
Federal Reserve Chairman Kevin Warsh voiced optimism about US economic strength and global resilience at the IMF-World Bank meetings in Bangkok, while declining to preview future interest-rate decisions. He cited investment momentum and AI's broadening impact as tailwinds.
Federal Reserve Chairman Kevin Warsh voiced optimism on Friday about US economic strength and expressed surprise at how well global economies have held up amid recent geopolitical shocks, despite tighter monetary policy aimed at fighting inflation.
"I came out of meetings here yesterday and today and 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 at the 2026 IMF-World Bank annual meetings in Bangkok. With inflation a "common challenge," he noted that global central banks undertook "a synchronous tightening in monetary policy in most places around the world, and that means there's no free riders."
In the US, he said, "We made very clear that we would deliver price stability, and we removed a dose of accommodation about a month ago," referring to the Fed's September interest-rate hike. However, in keeping with his style since taking the helm in May, he gave no preview of whether more rate hikes will be needed or when they might come.
"I don't prejudge meetings," Warsh added. "I don't believe in saying now what I might do at the meetings that we have in the balance of this year." His colleagues have been less reticent, with nearly all saying in recent weeks that more tightening is probably needed, though most wanted to see additional economic data to assess the inflation trend, signalling they were unlikely to deliver a second rate hike this month.
Financial markets have priced in a wait until December for any further move, even after reports this week showed two inflation measures running higher than expected and moving away from the Fed's 2 per cent goal. Warsh's decision to stick to broader themes leaves intact expectations that the Fed will not hike this month.
He touched on the impact of artificial intelligence, the need to maintain financial stability, and views on US growth and global economic resilience. "I feel in the United States that the real economy, because of a resiliency that you mentioned, but because of a surge of investment - which isn't just AI: that surge of investment is broadening," Warsh said in a conversation with IMF Managing Director Kristalina Georgieva.
"It means we've got plenty of tailwinds that are giving some strength and durability to this economy ... That sort of momentum is certainly not found everywhere in the world." He added that the global economy was "showing resilience that I'm not sure I would have predicted five or six months ago, given what's happening in geopolitics and hotspots around the world."
"I believe optimistically, you might think naively, at least in the United States, we're going to come out of this stronger with a more durable economy, more capable of leading the world on economic growth," he said.