Kevin Warsh says AI could lift productivity after a bumpy transition
The Federal Reserve chair said AI investment could push up prices in the short term, while its longer-term economic effects remain uncertain.
Federal Reserve Chair Kevin Warsh said at the IMF-World Bank Annual Meetings in Bangkok on October 16 that artificial intelligence could eventually make economies more productive, while the investment surge around it could raise prices in the short term. He warned that the transition would be bumpy, leaving policymakers to weigh its potential benefits against immediate inflation pressures.
Warsh called AI’s arrival probably the most consequential change to the US and global economy in his lifetime, according to an AFP report published by The Straits Times. He said he expected substantial benefits over time, but described the path toward them as uncertain.
How Warsh sees AI affecting inflation
Warsh said demand generated by the AI investment boom could drive prices higher in the near term. Over a longer horizon, he expects a positive supply-side effect as economies and countries that use the technology effectively become more productive. He said he approaches those competing forces ‘soberly, responsibly’ in his role as head of the central bank.
NBC News reported that US consumer price inflation had risen to 3.7% in the weeks after the Fed’s September meeting, when the central bank raised rates for the first time since 2023. Investors were watching Warsh’s appearance for clues about another increase, but he gave no clear indication of when the Fed might next raise rates, NBC reported.
What remains uncertain about AI’s effects
Warsh said the Fed could itself use AI to analyse data better when conducting monetary policy. He also said AI could change the wider economy, though NBC reported that he did not know how deeply it would affect employment. Those questions matter to the Fed as it assesses whether new investment is adding to inflation now and how much productive capacity the technology might create later.
‘The path from where we are to there is likely to be a very bumpy one,’ Warsh said, according to AFP. He pointed to uncertainty both about understanding the technology and about the market structure that will emerge around it. NBC also reported that a Fed task force of outside experts studying AI’s effects on the labour market plans to hold a public hearing in November.
Read in depth: Business
India’s September exports rise 23% as merchandise trade deficit widens
Merchandise exports reached $44.40 billion, but a larger rise in imports pushed the monthly goods deficit to $30.21 billion. A separate measure including services narrowed from...
States seek safeguards for children’s data in Character.AI bankruptcy
Forty state attorneys general want a Delaware bankruptcy court to protect sensitive chats and require child-safety measures as Character.AI explores an asset sale.
Sources and context
- AI ‘most consequential change’ to economy in my lifetime: Fed’s Kevin WarshAgence France-Presse (republished by The Straits Times)
- Warsh says Fed is focused on taming rising prices, but gives no hint about next rate hikeNBC News
AI-assisted article checked against the listed sources. NewsJaws did not conduct interviews or attend the reported events.