Fed Chairman Says AI Is Probably ‘Most Consequential Change’ to US, Global Economy ‘In My Lifetime’
Federal Reserve Chairman Kevin Warsh said the advent of artificial intelligence “is probably the most important change for the United States and the global economy to date.”
Warsh made the remark on Friday in a conversation with Kristalina Georgieva, the managing director of the International Monetary Fund (IMF).
“I take this seriously. But as a central banker, in a sober and responsible way, I would say this is going to do several things,” Warsh said.
“First, it obviously hits the demand side of the economy before it hits the supply side of the economy. See if you’re a central banker and your mission is to try to ensure price stability and full employment, you have to recognize this as a shock,” Warsh said. “But it’s a positive supply shock in the medium term. I’m fundamentally convinced of that.”
“Second, it’s a big problem for central banks because we’re trying to, in a way, distill noisy data all over the world. We get some of that from official statistics in the United States, from the Bureau of Labor Statistics, from the Bureau of Economic Affairs. We torture the data with old-fashioned models to try to find out what the underlying trends in inflation are,” Warsh said. “Soon, it won’t be torture anymore. 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 distill that data. So when we get new information, we will have much more confidence in what it tells us when we look out the window and ask ourselves: Is this real? Or is this lagged and noisy data subject to measurement errors? So I think that This will fundamentally change the conduct of monetary policy.”
“Third, it will change the real economy,” Warsh also said. “We don’t know its effect on employment in the next 12 or 18 months. But if you believe, as I believe, that this will make the economies and the countries that use it wisely more productive, that it will ensure that we will have more wealth, it must be a very good thing to be of these new technologies.
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