Fed Chair: Artificial Intelligence Could Fundamentally Transform Monetary Policy

Federal Reserve Chair Kevin Warsh has said that artificial intelligence will create a positive supply shock in the medium term, boost productivity, and significantly change how monetary policy is conducted. He also reaffirmed the Fed’s commitment to maintaining price stability.

Capitalistaz.com reports that Warsh made these remarks during a panel discussion held as part of the annual meetings of the International Monetary Fund (IMF) and the World Bank in Bangkok.

Warsh noted that the global economy has proved more resilient than expected, with structural economic growth and investment strengthening in several countries. According to him, investment in the United States has increased significantly.

The Fed chair said that sound macroeconomic policies and strong microeconomic fundamentals play an important role in boosting investment. He described rising investment activity as one of the major positive developments in the global economy.

Artificial Intelligence Could Accelerate Economic Growth

According to Warsh, artificial intelligence is one of the most significant technological developments for the U.S. and global economies in recent years. He believes that while the technology initially affects demand, over the medium term it will increase productivity and expand the economy’s supply capacity.

Warsh emphasized that central banks must consider the effects of artificial intelligence while pursuing their goals of price stability and maximum employment.

He added that AI could also transform how economic data are analyzed and monetary policy decisions are prepared. One of the five working groups established by the Fed to improve monetary policy implementation is focused on productivity and employment.

Fed Offers No Clear Signal on Interest Rates

Warsh did not provide specific guidance on future interest rate decisions. He said the Fed remains committed to maintaining price stability and had slightly reduced the accommodative stance of monetary policy about a month earlier.

According to him, it would be inappropriate to indicate in advance what decisions might be made at the Fed’s remaining meetings this year.

Warsh also pointed to a shift in the Fed’s approach, noting that a new era had begun at the institution.

Inflation Is a Global Problem

Warsh said the U.S. economy benefits from several factors that support its resilience, although these advantages are not equally present in every country. Despite geopolitical tensions and various risks, he stressed that the global economy has proved stronger than expected.

The Fed chair also noted that inflation is not a problem unique to the United States. He said central banks around the world are committed to achieving price stability.

Warsh’s remarks suggest that the Fed intends to keep price stability among its key monetary policy priorities while also taking into account the effects of artificial intelligence on productivity, employment, and economic growth.