Warsh gives no hint of the Fed’s October intentions, and investors trim their hike bets

Kevin Warsh said on Friday that the economy had largely performed as expected since September’s rate rise, hinting that little had changed in the central bank’s outlook, Axios reported⁸. “Over the month or so that’s transpired since then, the world has broadly conformed to our expectations,” he said at the IMF and World Bank annual meetings in Bangkok, referring to the Fed’s September meeting⁸. Interviewed by the IMF’s managing director, Kristalina Georgieva, he offered no explicit signal about October: “I don’t prejudge meetings”^5,8.

The Wall Street Journal reported that Warsh declined to endorse or push back on colleagues’ signals that officials are in no rush to raise rates this month, saying the central bank was no longer in that business⁹. “We’re not in that business anymore,” he said after firm inflation data raised questions about the timing of the next increase⁹. Reuters reported that he pointed to US resilience while staying mum on the rate path¹⁰, and the Journal reported separately that investors trimmed their bets on an October rise after the comments². The Financial Times reported that bets on a hold in October strengthened¹. Earlier this week two Fed officials had already played down an October move².

Why it matters to investors

A chair who says he does not prejudge meetings removes the usual guidance from the week before a decision, and leaves the data to do the work^5,8. Axios noted that the Fed is weighing another increase later this month while inflation heats up and the economy remains strong⁸, and CNBC said the inflation numbers may yet tip his hand⁵.

The market reaction came from his comments on technology rather than on rates. Bloomberg reported that S&P and Nasdaq futures moved higher on his artificial-intelligence remarks⁶, and that the MSCI emerging-market index extended gains to 1%, its first gain of the week, after he said AI was set to be a large benefit to the United States⁷. The New York Times reported that the S&P 500 appeared set to open higher on Friday largely because of him⁴, and the Journal said he had sidestepped talk of interest rates while highlighting AI’s benefits².

What to watch

The decision this month is now genuinely open on the public record: the chair has declined to guide it^9,10, his colleagues have signalled no rush⁹, and market pricing has moved towards a hold^1,2. The Journal said Warsh had the opportunity to address the question on Thursday and did not take it³.