Warsh Refuses to Tip the Fed's Next Move and Tells the World's Central Banks There Are No Free Riders

The world's most powerful central banker flew to Bangkok and refused to tell markets what he will do next. Fed Chair Kevin Warsh declined on Friday to signal whether another rate hike is coming this month, then told his peers that they are all in the same fight against inflation.

"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," Warsh said at a fireside chat with IMF Managing Director Kristalina Georgieva during the IMF and World Bank Annual Meetings, CNBC reported. He repeated his opposition to forward guidance and admitted the stance may disappoint anyone hoping for a steer. "It's a new chapter at the Fed [and] we're not in that business anymore."

No free riders

What he did offer was a view of the whole board. Central banks have different tools and sequences, he said, but over the last few months "it was a synchronous tightening in monetary policy in most places around the world."

"That means there's no free riders. We're seeing common things and we're taking action. And I view that as a positive development," Warsh said. "Inflation is not unique to the United States, so we're looking at it together. I heard resolve from my colleagues around the world to deliver price stability."

The pressure is real. Surging energy costs from the Iran war and the AI investment boom are stoking inflation and lifting borrowing costs worldwide, while global public debt is on pace to pass 100% of world GDP, a level last breached after World War II. The IMF projects global headline inflation at 4.7% this year. The ECB and the Bank of Japan have each hiked by a quarter point, and US inflation has been above the Fed's 2% target for 67 straight months, the Epoch Times noted.

What markets heard anyway

Silence still sends a message. Goldman Sachs economists led by Jan Hatzius read the remarks, alongside other recent comments from Fed officials, as a sign the committee "is set to pause in October," and said they still expect "a second and final hike in December."

Traders broadly agreed. At the time, CME FedWatch put the odds of no change at the Oct 27 to 28 meeting at 72.3%, and most traders expect a 25 basis point hike in December. S&P 500 and Nasdaq futures edged higher after the speech, while Asian stocks and Treasury yields barely moved. The Fed raised rates in September to 3.75% to 4%, its first hike since 2023, a move that drew a demand from Trump for rates of 1% or less.

Surprised by resilience, hopeful on AI

Asked by Georgieva what he would take home, Warsh said "almost everywhere in the global economy" was showing a resilience he was not sure he "would have predicted five or six months ago," given geopolitics and hot spots, according to the Bangkok Post. The hall was packed and the overflow room was full. Georgieva agreed that a shared vision on price stability gives businesses and households confidence, calling it one of the big messages of the meetings, Nation Thailand reported.

On AI, Warsh was upbeat with a caveat. He expects it to make economies that use it well more productive and wealthier, but warned the road may be "very bumpy" and its near-term effect on jobs is uncertain. "I want you to hear from me optimism, but optimism leavened by the seriousness of purpose," he said, predicting that a decade from now people will "say this was hugely consequential."

His sober tone sits awkwardly beside Washington's line on debt. The US government insists strong growth is the best way out and has dismissed the IMF's warning that growth alone won't work as something to take "with a grain of salt." Treasury Secretary Bessent skipped the Bangkok meetings altogether.

Warsh, who took over as chair in May, can keep his cards hidden for now. On October 27 and 28 the committee has to play one.

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