Fabio Panetta Warns AI Gains Will Shape Inflation

Fabio Panetta, a member of the European Central Bank Governing Council and Governor of the Bank of Italy, stated that central banks must analyze the distribution of artificial intelligence-driven gains to manage inflation and aggregate demand. Speaking at an event hosted by the National Bank of Ukraine in Milan, Panetta argued that AI will transform productivity, growth, payment systems, and labor and financial markets.

Panetta warned that inflationary pressures could extend if AI primarily creates new tasks and increases labor income, causing demand to rise before productivity benefits are fully realized. He noted an alternative scenario where automation dominates, which could reduce consumption and accelerate disinflationary effects. He emphasized that understanding these shifts is essential for maintaining central bank credibility.