Fed’s Warsh says AI ‘most consequential change’ to economy in his lifetime

US Federal Reserve chair Kevin Warsh said Friday that AI technology was the “most consequential change” to the global economy he had seen, predicting its effects would be positive but the path forward would be “bumpy”.

“I’d say the advent of this new technology is probably the most consequential change to the US and the global economy in my lifetime,” he told an event at the IMF-World Bank Annual Meetings in Bangkok.

Warsh said he takes the macroeconomic implications of the technology — including a short-term driving of inflation through demand-side effects and an expected positive supply-side shock in the long term — “soberly, responsibly” in his role as head of the US central bank.

He conceded that the AI investment boom would drive prices up in the short term, but “there really is, I think, a huge benefit to the global economy, to the US economy over the horizon”.

He said he expected the Fed to use AI to be able to better analyse data in its conduct of monetary policy, as an example of the positive effects.

He also reiterated his previously stated belief that the technology would “make economies and countries that put it to good use more productive”.

He cautioned, however, that the path forward was still laced with uncertainty about how markets would evolve around the technology.

“The path from where we are to there is likely to be a very bumpy one, bumpy in our understanding of the technology, bumpy because we really don’t know what the market structure is going to be of these new technologies,” he said.