Kevin Wash, Chair of the U.S. Federal Reserve, reaffirmed his commitment to achieving price stability on October 15, while maintaining a cautious stance regarding future interest rate decisions. With rising inflationary pressures due to soaring energy prices amid the conflict in Iran, market attention is turning to the Federal Open Market Committee (FOMC) meeting scheduled for October 27-28.
According to reports from Reuters and others, Wash made these comments during a discussion with Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF), at the IMF-World Bank Annual Meetings in Bangkok. He stated, "The Fed clearly demonstrated its commitment to achieving price stability by raising rates in September and adjusting monetary policy in a more contractionary direction." He added, "I do not want to speculate on the outcomes of the FOMC meeting, and it is not appropriate to discuss what decisions will be made in the remaining meetings this year."
This statement comes as one of Wash's last major public remarks ahead of the October FOMC meeting, as Fed officials enter a blackout period where they refrain from policy-related comments before the meeting. Consequently, the market is closely monitoring his assessment of inflationary pressures and future interest rate trajectories.
Investors did not find any hints of a rate hike in Wash's remarks, leading them to lower the likelihood of an increase at the upcoming FOMC meeting. Bloomberg reported that the probability of a rate hike in October dropped from about 27% before Wash's comments to below 15% afterward.
In financial markets, the dollar weakened as Wash did not provide specific signals for a rate increase. The U.S. dollar index (DXY) fell by 0.22% to 101.82 compared to the previous trading day.
Initially, the market had anticipated that the Fed would hold rates steady in October before considering an increase in December. However, recent releases of the Consumer Price Index (CPI) and Producer Price Index (PPI) exceeded market expectations, reigniting concerns about inflation. As a result, speculation about a potential rate hike in October has not been entirely dismissed.
Indeed, the U.S. PPI for September rose by 1.3% compared to the previous month, significantly surpassing the market expectation of 0.6%, marking the largest monthly increase since March 2022. The CPI released the previous day also rose by 3.7% year-over-year, exceeding the expected 3.6%. The month-over-month increase of 0.6% was the highest in five months since April.
The surge in prices has been attributed to rising energy costs driven by the conflict between the U.S. and Iran. The increase in energy prices is affecting not only consumer prices but also production costs, raising concerns that inflation may persist longer than anticipated.
Meanwhile, Wash expressed optimism regarding artificial intelligence (AI) during the discussions. According to reports from U.S. CNBC, he stated, "The surge in demand for AI will bring tremendous advantages to the U.S. economy." He predicted that AI would first impact the demand side of the economy and enhance the central bank's data analysis capabilities. While he noted that productivity would increase and profits would rise due to AI, he cautioned that the process could be fraught with challenges, highlighting both the economic benefits and uncertainties associated with AI.
* This article has been translated by AI.
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