Kevin M. Warsh, chairman of the Federal Reserve, reiterated his commitment to “deliver price stability,” amid rising energy prices and soaring investments in artificial intelligence, which he called a “shock” to the economy.
A.I. promises huge economic benefits in the long run, he said, but warned the path there “is likely to be a very bumpy one.”
“The advent of this new technology is probably the most consequential change in the U.S. and the global economy in my lifetime,” he said. Unlike the escalating violence in the Middle East and other geopolitical tensions, A.I. is a “positive shock,” but it is still disrupting the economy, he said.
Mr. Warsh spoke Friday in Bangkok before a standing-room-only crowd at the annual meetings of the International Monetary Fund and World Bank.
As expected, he did not offer any specific guidance about what the Fed might do at its meeting later this month. “I don’t prejudge meetings,” he said, “we’re not in that business anymore.”
His comments, made in conversation with the Fund’s managing director, Kristalina Georgieva, came right after she had warned of inflation pressures and the need for central banks to keep a tight rein on monetary policy in an earlier session.
“Central banks should be laser-focused on price stability,” she said, adding that she welcomed the “firm language” coming from the Federal Reserve and other central banks.
“Rate hikes today are better than falling behind the curve” and having to impose bigger rate hikes later, she said.
Mr. Warsh’s comments were the last scheduled remarks before the Fed enters its communications blackout on Saturday, ahead of its policy meeting on Oct. 27-28. That meeting comes just days before the midterm elections, which will determine whether Republicans retain control of Congress.
Expectations for what the Fed will do shifted after new inflation data showed price pressures accelerated in September.
Overall prices rose 0.6 percent, the largest monthly increase in five months. Compared with the same time last year, prices were 3.7 percent higher. Wholesale prices also rose, while retail sales figures showed consumers continued to spend.
According to the Fund’s projections, inflation in the United States is not expected to return to its 2 percent target until the middle of 2028.
In recent weeks, several top policymakers had made the case that the Fed could raise rates gradually after voting unanimously in September to lift them by a quarter of a percentage point to a new range of 3.75 percent to 4 percent.
According to rate projections released alongside that rate decision, most Fed officials expected one more quarter-point increase this year after September’s move.
The latest inflation data, though, has fueled speculation that the central bank might make further adjustments more quickly.
Beth Daily, the San Francisco Fed president, said Thursday that she was increasingly concerned about inflation’s “persistence.” In New York, Cleveland Fed president Beth Hammack told business leaders that inflation expectations might require “more” from the Fed.
After October’s meeting, the Fed’s final gathering this year is in mid-December.
Mr. Warsh has made taming inflation his top priority since he began his chairmanship in May. Broadening price pressures likely make a gradual approach harder to justify.
Raising rates will keep the central bank in the cross hairs of President Trump, who has repeatedly attacked it for failing to acquiesce to his demands for substantially lower borrowing costs.
Mr. Trump has spared Mr. Warsh, whom he handpicked for the job, the bulk of the criticism. Instead, he has directed his ire at the chairman’s colleagues on the Board of Governors.
Mr. Trump is currently engaged in a protracted legal fight with one of those seven members, Lisa D. Cook, whom the president has tried to fire for over a year over allegations that she committed mortgage fraud. The White House last week announced an investigation into Ms. Cook, culminating in an in-person hearing that she was directed to attend.
Mr. Warsh made a point of defending the Fed, its previous leaders and its staff. “Power comes from our institutional credibility, bestowed on me by the great chairmen that came before me,” he said.
Since taking over as Fed chairman, Mr. Warsh has sought to recast how the central bank approaches its policy decisions. He has stressed that he focuses on economic trends rather than specific releases, calling data-point dependence “a dangerous preoccupation.”
He has also broadly rejected the idea that the central bank should guide expectations about the Fed’s next policy moves and has left it to other officials to steer them.
Mr. Warsh noted that A.I. could transform how the Fed does its work because of its enormous analytical potential. This is “a big deal for central banks,” he said.
As part of Mr. Warsh’s goal of enacting “regime change” at the central bank, he has launched five task forces to examine issues ranging from how the Fed communicates to how it measures inflation.
In its latest World Economic Outlook, the I.M.F. estimated that global inflation will increase to 4.7 percent this year and 4.1 percent next year.
Escalating violence in the Middle East is fanning fears that energy and related costs could surge even higher.
Ms. Georgieva also chastised the richest countries for running up huge debts, which could contribute to inflation pressures. “This time around, advanced economies are the worst offenders.”
“The U.S. needs to save more, China needs to spend more, and Europe needs to invest more,” she said.
Colby Smith contributed reporting
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