Fed’s Kevin Warsh Says AI Boom Is Not Overheating US Economy

US, Oct 29 : Federal Reserve Chairman Kevin Warsh has said the US economy is not growing at an unsustainable pace despite increased investment in artificial intelligence (AI), arguing that the central bank should avoid measures that unnecessarily restrict economic expansion.

Speaking at a news conference on Wednesday after the Federal Reserve kept interest rates unchanged, Warsh said the US economy was moving in a positive direction. He noted that most of his colleagues did not consider economic activity excessively strong, although accurately estimating the economy’s potential growth rate remained challenging.

Warsh also rejected the suggestion that stronger economic growth was directly contributing to inflation or complicating the central bank’s efforts to maintain price stability.

He attributed part of the economic improvement to rising productivity, while acknowledging that the available measurements were imperfect. According to him, productivity gains had begun before the latest developments in advanced AI and superintelligence attracted widespread attention.

The remarks highlight the Federal Reserve’s assessment of the relationship between technological investment, economic output and inflation. While AI-related spending has generated expectations of stronger productivity, policymakers continue to evaluate how these developments affect overall economic conditions.

Warsh Dismisses Political Influence on Interest-Rate Decision

Warsh also rejected suggestions that political considerations influenced the Federal Open Market Committee’s (FOMC) decision to maintain interest rates.

With the US midterm elections approaching, he emphasised that the committee’s discussions remained focused on economic data and monetary policy rather than electoral developments.

He said he had spent two days consulting with fellow policymakers and had heard no references to politics, the elections or events expected in the following week.

His comments underscored the central bank’s position that interest-rate decisions must be guided by economic conditions rather than political pressures.

Fed Chair Addresses Investigation Into Lisa Cook

Warsh further addressed questions about a White House investigation involving Federal Reserve Governor Lisa Cook, saying that, to his knowledge, he would not participate in the proceedings.

Cook has faced allegations of making misstatements on mortgage applications, which have become central to President Donald Trump’s efforts to remove her from the Federal Reserve Board.

Cook challenged the attempted dismissal in court, arguing that she should remain in office. The dispute subsequently reached the US Supreme Court, which ruled during the summer that the president could not remove a central bank official at will and was required to establish cause for dismissal.

Trump later established a three-member committee led by his senior economic adviser to investigate the allegations and conduct a hearing on the evidence collected.

The matter has raised questions about the independence of the Federal Reserve and the legal limits on presidential authority over its officials.

Warsh’s remarks addressed both the economic outlook and the importance of keeping monetary policy decisions separate from political considerations as the United States navigates technological change, inflation concerns and institutional challenges.