Fed Chair Warsh says AI will fundamentally change how monetary policy is made
As seen on the 24/7 Wall St. homepage on October 16, 2026.
A sitting Fed chair signaling that AI will reshape how inflation gets measured means rate decisions may soon run on a different set of inputs than the ones traders have modeled for decades.
Fed Chairman Kevin Warsh says AI is going to "fundamentally change the conduct of monetary policy" by improving forecasts. "We torture data with old-fashioned models to try to find out what's underlying inflation trends. Not so long from now, it won't be torture." https://t.co/xTuXjBBIBi
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Fed Chairman Kevin Warsh made a pointed case that artificial intelligence will "fundamentally change the conduct of monetary policy" by producing sharper, faster inflation forecasts than the models the Fed currently relies on.
Warsh described the current state bluntly: "We torture data with old-fashioned models to try to find out what's underlying inflation trends." That kind of candor from a sitting Fed chair is rare, and it signals genuine dissatisfaction with the analytical tools driving today's rate decisions.
Rate decisions are priced off decades of behavioral patterns tied to how the Fed has historically read inflation signals. If the underlying inputs shift to AI-driven forecasts, the historical relationships that inform bond positioning, equity multiples, and rate-path expectations will no longer hold in the same way.
Warsh stopped short of a timeline, saying only that relief from data "torture" would arrive "not so long from now," which leaves open the question of whether this shapes policy before the next major rate cycle turns.