Fed chairman Warsh stays quiet on interest rates
Federal Reserve Chairman Kevin Warsh declined to signal whether United States policymakers will raise interest rates this month, while emphasizing that central banks around the world have been tightening monetary policy, leaving “no free riders” in the global fight against inflation.
“We have different tools, different sequences. But I would say if I look back over the last few months, while we each did the right thing by our own judgment, by our own remit, it was a synchronous tightening in monetary policy in most places around the world,” Warsh said Friday at a fireside chat with the International Monetary Fund’s Managing Director Kristalina Georgieva. The discussion was part of the IMF-World Bank Annual Meetings in Bangkok.
The central banks’ coordinated effort to tighten policy indicates that there are “no free riders. We’re seeing common things and we’re taking action. And I view that as a positive development,” Warsh said.
Warsh’s statement comes at a time when policymakers around the world are dealing with rising inflation owing to an escalating tension in the Middle East that has disrupted global energy supply. The IMF has projected global headline inflation to rise to 4.7 percent this year.
“Inflation is not unique to the United States,” Warsh said, noting that central bankers around the world have to ensure price stability.
Warsh said the Fed’s policies “spill over to the rest of the world, but their policies spill back to us too”.
“So I had made judgments about a month ago,” Warsh said, alluding to the US first rate hike in three years.
On September 16, the Fed raised interest rates for the first time since 2023. The Federal Open Market Committee voted unanimously to lift the benchmark rate by 25 basis points to a range of 3.75 to 4 percent.
The US rate hike has sent ripples across the Asia-Pacific. Soon after the Fed made its announcement, the Bank of Japan increased the rate from 1 percent to 1.25 percent — its highest level since 1995.
In India, traders said it was likely that the Reserve Bank of India intervened in the foreign exchange market as the rupee fell below the 96-per-dollar mark for the first time in over a month following the Fed rate hike, Reuters reported.
Analysts said that the higher Fed rate would further pressure Asian currencies as the US dollar strengthens.
Warsh said the Fed will “make some judgments” at the October and December meetings.
The FOMC will hold a meeting on Oct 27-28.
“We’ll be meeting a couple more times this year, and that will be the crystallizing moment at which we’re going to look out the window. What do we see? What’s happening to output? What’s happening to employment?” Warsh said.
He noted that in the US there’s “a massive investment surge” thanks to a good macroeconomic policy and strong micro foundations.
“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. It obviously affects each of us differently,” Warsh said.
He said while the US is benefiting from a surge of investment, this is not the case for other economies.
“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.”