The New Fed Chief’s First Job Is To Read The AI Boom.

The Question Before The Question

When we talk about a Federal Reserve chair, we picture someone deciding whether to raise rates or cut them. But Kevin Warsh’s real first job isn’t that at all. It’s diagnosis. Before you decide what to do, you have to decide what moment you’re in — and right now the moment is being defined by one thing: the artificial-intelligence build-out.

That build-out is unmistakably pumping demand into the economy. Data centers going up, electricity demand climbing, chips selling as fast as they can be made, stock prices soaring on the back of it. That part isn’t in dispute. The dispute is over timing — and timing is the whole ballgame for a central banker.

Sit Still, Or You’re Already Overheating

Here’s the fork. If the productivity payoff from all this AI spending arrives soon, the economy can absorb the extra demand without much inflation, and the right move is to sit still and let it work. If the payoff arrives years late, then all you have today is a wall of spending with no offsetting output — which means you’re overheating right now and should already be leaning against it.

Warsh leans toward the confident read. He likes the “1996 Alan Greenspan” comparison — the chair who looked at a productivity surge, decided the economy had a higher speed limit than the models said, and let the boom run rather than choking it off. It’s the optimist’s posture: trust that the payoff is coming.

Not everyone buys it. Chicago Fed President Austan Goolsbee makes the uncomfortable counterpoint: a boom that everybody sees coming pulls demand forward. Companies build ahead of the payoff, spend ahead of the revenue, and that front-loaded demand can force the Fed into bigger hikes later than if it had acted sooner. In other words, the very confidence that lets you sit still today may be what makes you slam the brakes tomorrow.

The Split Is The Story

This isn’t a theoretical argument, either. The Fed held rates this week — but nearly half of officials now see rates rising by year-end. That’s not a committee that’s comfortable. That’s a committee openly split on whether it still has to hike again. For anyone living off their portfolio, that split is the headline, not the hold.

What it tells me is simple: higher-for-longer isn’t going anywhere. The market keeps wanting to price imminent cuts, and the Fed keeps refusing to confirm them. When half the room is talking about hikes, betting your retirement income on a near-term pivot is betting against the people who actually set the rate.