AI To Fundamentally Change Monetary Policy – Fed Chair

BANGKOK, Oct 16 (Bernama-Sputnik/RIA Novosti) -- Artificial intelligence will fundamentally change how central banks conduct monetary policy, although its impact on macroeconomic indicators remains unclear, United States (US) Federal Reserve Chairman Kevin Warsh said on Friday, reported Sputnik/RIA Novosti.

Warsh described the emergence of AI as the most significant change for the US and global economy in his lifetime.

He said AI tools would transform central banks’ decision-making by enabling them to process vast amounts of information more quickly and distinguish genuine economic signals from lagging or distorted data more accurately.

“Not so long from now… we will have access at the fingertips of central banks to all the information in the world, and we will be able to use new analytical tools to distil that data… I think it is going to fundamentally change the conduct of monetary policy,” Warsh said at the annual meeting of the International Monetary Fund and the World Bank Group in Bangkok.

On AI’s macroeconomic impact, Warsh said the technology primarily affected demand in the short term, while its positive effects on supply and productivity would emerge later.

“If you are a central banker and you are in the business of trying to ensure stable prices and full employment, you have got to recognise that this is a shock, but it is a positive supply shock in the medium term,” he said.

Warsh acknowledged uncertainty over AI’s implications for the labour market, saying it remained unclear how the technology would affect employment over the next 12 to 18 months.

In the long run, widespread AI adoption would boost productivity and prosperity, but the transition would likely be uneven, Warsh said.

He added that it remained unclear how the market for new technologies would evolve and who would ultimately reap the greatest economic benefits.

-- BERNAMA-SPUTNIK/RIA NOVOSTI