One signal

Kevin Warsh, chair of the US Federal Reserve, says AI could push prices up in the short term through investment and demand, while delivering a positive supply-side shock over time. He called it the most consequential change to the US and global economy in his lifetime, speaking at the IMF-World Bank meetings in Bangkok.

Warsh also expects the Fed to use AI to analyse data for monetary policy. That is a concrete use case from the central bank’s own leader, not just another prediction about what businesses might do. The path, he cautioned, will be bumpy: markets and the shape of the technology remain uncertain. The useful tension is already clear, though. AI could raise costs before its productivity gains arrive. Should central banks treat that transition as a temporary price shock, or as a reason to rethink how they measure the economy?

Discuss: Should central banks treat AI’s near-term inflationary effects as a temporary shock, or rethink how they measure the economy as productivity changes?

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