Fed Chair Warsh: "Watching South Korea's Economy... AI Investment Also Affected by High Interest Rates"

Mention of his ties to Bank of Korea Governor Shin Hyunsong draws attention.

Kevin Warsh, nominee for chair of the U.S. Federal Reserve (Fed), said that investment in artificial intelligence (AI) is also not immune to the effects of high interest rates. His remarks countered claims by some that the AI sector would not be affected by rate hikes. He also said that a significant share of the inputs needed for the AI investment boom comes from South Korea and Japan, adding that he is closely watching the South Korean economy.

Kevin Warsh, nominee for Fed chair. Yonhap News Agency

At a press conference following the Federal Open Market Committee (FOMC)'s October meeting on Oct. 28 local time, Warsh said, "Interest rates affect almost everything, both directly and indirectly," adding, "I don't think the surge in investment related to new technologies is separate from the rest of the economy."

His remarks opposed the view held by some that the AI sector's high expected returns would make it immune to the effects of rate hikes. "Since early September, we've seen interest rates having an impact both within and beyond the technology sector," Warsh said, assessing that the effects of monetary tightening had also emerged in the technology sector, including AI, after the Fed raised its benchmark interest rate by 0.25 percentage points at the September FOMC meeting.

He also stressed that the investment boom in the United States is not limited to AI. "Capital spending is broad-based, going beyond simply being solid or strong," he said. "Recent data have made it more difficult to argue that the strength of the economy is concentrated in just a few areas of technology."

Warsh said it is difficult to assess the impact of AI on prices. "Aggregate demand can be directly observed and measured, but aggregate supply has to be inferred," he said. "In a sense, demand and supply are competing with each other, and the surge in corporate capital spending centered on AI is making this assessment more difficult."

Bank of Korea Governor Shin Hyun-song speaks at a press conference on the monetary policy direction following a Monetary Policy Board meeting at the Bank of Korea in Jung-gu, Seoul, on Oct. 22, 2026. Photo by Kim Hyun-min.

He said he is also paying close attention to the South Korean economy. Asked by a South Korean journalist about the impact of the Fed's balance-sheet reduction on demand for U.S. Treasury securities and dollar funding markets in overseas markets such as South Korea and Japan, Warsh replied, "I pay more attention to the South Korean economy than you might think."

He added, "A significant share of the inputs needed for the new technology investment boom comes from South Korea and Japan, and some come from Singapore." He explained, "Looking at the South Korean economy tells us what is coming into the United States by plane or ship."

Warsh also spoke about his longstanding relationship with Bank of Korea Governor Shin Hyun-song. "Governor Shin is a highly capable person and a good friend whom I've known for about 20 years," he said. "I'm glad that he has taken on the role of governor of the Bank of Korea." He recalled that he first met Shin during the global financial crisis, when they discussed ways to use central bank balance sheets in an emergency, among other topics.

This content was produced with the assistance of AI translation services.