Federal Reserve Chair Fed Chair Kevin Warsh expressed an optimistic view regarding the economic changes that artificial intelligence (AI) will bring, while keeping his remarks guarded on future interest rate decisions.
Speaking at a public dialogue with International Monetary Fund (IMF) Managing Director Kristalina Georgieva in Bangkok on the 16th, Warsh stated that AI “will bring the most significant changes to the US and global economy in my lifetime.” He added that while “AI will transform the real economy, improve productivity, and increase wealth, the process will not be smooth,” noting that the short-term impact on employment remains uncertain.
Warsh also projected that AI will drive major changes in central bank policy decisions. He mentioned that it will “fundamentally alter the operation of monetary policy, such as helping central banks analyze data better.” He further revealed that the Productivity and Employment Task Force (TF), established early in his term, plans to hold an AI-related field hearing in San Francisco on the 16th of next month.
He also showed confidence in the US economy. Following the Federal Open Market Committee (FOMC) meeting in September, where the benchmark interest rate was raised by 0.25 percentage points, Warsh noted that “the global economy has largely proceeded as expected,” adding that “the US economy is currently experiencing structural growth and a surge in investment, and the concept of a long-term recession is now a thing of the past.”
However, he drew a line regarding the future path of interest rates, stating, “It is not appropriate to say right now what we will do at the remaining meetings this year.” This statement came amid growing concerns over additional tightening after the US Consumer Price Index (CPI) and Producer Price Index (PPI) for September, released sequentially on the 14th and 15th, both exceeded market expectations. According to Bloomberg, the probability of an October rate hike in the fed funds futures market dropped from 30% to 17% following Warsh’s remarks.
At the same time, the dollar index, which measures the greenback against six major currencies, fell 0.17% from the previous day to the 101 level. S&P 500 and Nasdaq stock index futures also showed an upward trend. Wei Liang Chang, a macro strategist at DBS Bank, said, “The market is reassured by Warsh reaffirming his belief that AI will improve productivity in the medium term,” adding, “It helped ease concerns over the Fed’s consecutive rate hikes.”
The domestic stock market also rebounded. The KOSPI, which plunged 7.57% the previous day, rose over 4% during the session to reclaim the 5,700 level. The KOSDAQ index also surged over 5% during the session, triggering a program trading sidecar (temporary suspension of program buy orders) at 12:55 PM.
