AI's Productivity Gains May Fuel Inflation, Warns Former Chicago Fed Chief

Deep News17:01

Former Chicago Federal Reserve Bank President Charles Evans has indicated that while some believe artificial intelligence could curb inflation by boosting productivity, the widespread adoption of AI might instead create inflationary pressures for central banks if constraints in chip supply and production capacity drive up relative prices.

Speaking at an event in Hong Kong, Evans noted that AI could lead to job losses and mismatches in the labor market.

Under such conditions, accommodative monetary policy may have limited effectiveness in addressing structural inefficiencies and could potentially intensify inflationary pressures.

Monetary policy alone cannot resolve labor market mismatches triggered by AI; such transitional challenges may require fiscal, business, or broader coordinated responses.

Note: A former New York Fed president has stated that the case for interest rate cuts currently appears weak, and the neutral interest rate may be higher than the Federal Reserve's assumptions.

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