Federal Reserve Chair Kevin Warsh spoke at an International Monetary Fund forum in Bangkok on Friday, highlighting the potential of artificial intelligence (AI) to enhance economic productivity in the medium term. He noted, however, that this transition could introduce uncertainties in employment, inflation, and financial markets.
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Warsh described AI as one of the most significant technological advancements influencing both the US and global economies during his lifetime. He anticipates that AI will have a positive supply-side effect, enabling businesses to boost output through improved productivity. Currently, he stated that AI's primary contribution is in increasing economic demand, driven by investment and spending in the technology. The more substantial impacts on productivity may take longer to develop, which adds uncertainty around the timing and scale of its economic benefits.
The chair also addressed concerns about how the transition to greater AI adoption could affect labor markets and various industries. He pointed out that the implications for employment, market structure, and the distribution of economic gains remain unclear. These factors pose challenges for monetary policymakers who strive to understand the effects of technological changes.
Warsh emphasized that the Federal Reserve is closely studying how AI could influence inflation, productivity, and financial stability as its adoption spreads among businesses and consumers. The central bank is engaging with external task forces, including one dedicated to productivity and employment, which will convene its first field hearing in the San Francisco Bay Area on November 16. He reiterated the Federal Reserve's commitment to maintaining price stability following its decision to adjust monetary policy in September.