Federal Reserve Chair Kevin Warsh gave no indication to counter market expectations that the US central bank will leave interest rates unchanged at its meeting later this month.
Stocks added to gains on the news, with futures for the S&P 500 Index erasing losses to rise 0.2%.
Speaking during a moderated discussion on Friday morning in Bangkok at the International Monetary Fund's annual gatherings, Warsh avoided any comments on monetary policy or his view of the US economy, only restating that the Fed will ensure price stability.
"We made very clear that we would deliver price stability, and we removed a dose of accommodation about a month ago," Warsh said. "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."
Investors reduced their wagers on a rate increase at the central bank's Oct. 27-28 policy meeting. The odds, which were around 27% before Warsh spoke, fell below 15% after his comments.
"It was clear that he wasn't going to deliver anything that the market could latch on to as hawkish," Derek Tang, an economist at Monetary Policy Analytics, wrote in a note to clients.
The Fed lifted interest rates by a quarter percentage point in September, the first increase since 2023. It was supported by all 19 policymakers, and a majority also saw another increase as likely this year.
Warsh said on Friday that "the world has broadly conformed to our expectations" since the last meeting of the Federal Open Market Committee in September. A few key officials in recent weeks repeated that additional rate increases may be needed, but stressed they have time to collect economic data before acting again.
"Alongside other recent comments from FOMC participants, Warsh's comments indicate that the FOMC is set to pause in October," economists at Goldman Sachs Group Inc. led by Jan Hatzius wrote in a note, adding that they expect a final increase in December.
Warsh restated his optimistic views on artificial intelligence, calling it the most important innovation in the global economy during his lifetime. But he also cautioned that it may be fueling demand in the near term.
The Fed chief said that as a central banker, he is taking the new technology seriously but also "soberly, responsibly."
"It's obviously hitting the demand side of the economy before it's going to hit the supply side of the economy," Warsh said. "If you're a central banker, you're in the business of trying to ensure stable prices and full employment, you've got to recognize this as a shock."
While it is a positive supply shock in the medium term, Warsh argued, it is driving increases in aggregate demand now and the impact on employment is uncertain.
Some of Warsh's colleagues have voiced similar worries, even questioning whether the surge in investment that is supporting the AI build-out could lead to an overheating of the economy.
Warsh also announced that his task force on productivity and jobs – which is dealing with the implications of AI — will hold a field hearing in the San Francisco Bay Area on Nov. 16. It is one of five task forces Warsh convened that will present recommendations to the Federal Open Market Committee late this year or early in 2027.
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