Fed Governor Christopher Warsh Says AI Will Transform Monetary Policy

Federal Reserve Governor Christopher Warsh stated that artificial intelligence represents the most consequential change to the United States and global economies in his lifetime. He characterized AI as a positive supply shock in the medium term, although he noted that the technology is currently increasing aggregate demand.

Warsh asserted that AI will fundamentally change the conduct of monetary policy by providing central banks with advanced analytical tools to distill noisy global data and reduce reliance on traditional models. While he expressed optimism regarding long-term wealth creation and productivity, he warned that the transition will be bumpy due to uncertainties surrounding employment and market structure.

To address these shifts, Warsh initiated external task forces, including a group focused on productivity and jobs. This task force is scheduled to hold its first field hearing in the Bay Area on November 16.