Fed chair Warsh pushes real-time AI data tools while keeping rate hikes on table

Federal Reserve Chairman Kevin Warsh is trying to rethink how the central bank guides the economy while still using standard tools against persistent inflation, Axios reported. Axios said markets sold off after a July 29 press conference in which Warsh was vague about raising rates, drawing sharp criticism, though stocks and bonds later recovered. Since he became chair, markets have come to expect one or two rate hikes by year-end, aligning with an emerging majority of the policy committee pending late-summer inflation data, the report said. Warsh wants the Fed to use AI to understand the economy in real time and improve decision-making over a couple of years, while sticking to a traditional playbook now. Axios reported he has encouraged staff to use generative AI more expansively, with dozens of employees in a virtual sandbox, and is focused on whether real-time information from retailers, banks, and other companies can guide inflation and growth better than delayed, revised government surveys. Before taking office, Warsh built AI bots named Milton and Tobin that ingested works of Milton Friedman and James Tobin and used them on contemporary questions, associates told Axios. He also raised the possibility of cutting policy meetings from eight a year to six so each meeting can incorporate two months of inflation and employment data, or keeping eight meetings with two reserved for longer-term debates; no decision has been made. Axios described a July 29 bond-market blowup as a reminder of the hazards of bringing the "move fast, break things" tech sensibility to a 112-year-old central bank with a $6.7 trillion balance sheet, while saying the Warsh Fed is expected to keep pushing technology boundaries with more reassurance that the basic toolkit remains intact for now.