Fed Chairman Declines to Signal an October Rate Rise
Kevin Warsh, asked at the International Monetary Fund meetings in Bangkok whether American rates will rise this month, would not say: “I don’t prejudge meetings. I don’t believe in saying now what I might do.” Traders now put the chance of no change on 27 and 28 October at 72.3%. Asian shares rebounded, with Seoul up 2.8% and Tokyo 1.8%.
This is a reversal of the position two days ago, and worth saying so plainly: after Wednesday’s inflation figure the market put an October rise at close to even money, having been at about one in five before it. It is now roughly one in four, and Goldman Sachs economists led by Jan Hatzius read the remarks as settling it — “the FOMC is set to pause in October” — while still expecting a rise in December. Mr Warsh was pointed about the change of regime at the central bank, which raised rates last month for the first time since 2023: “It’s a new chapter at the Fed and we’re not in that business anymore.” On the technology boom he was optimistic but hedged, warning the road will be “very bumpy”. The rebound in Asia undid most of Thursday’s rout and followed Nvidia’s chief executive Jensen Huang saying of the most indebted data-centre builder that “their cost of capital is actually decreasing”. One market went the other way: Indonesia’s index fell 11% after being told it no longer merits emerging-market status.