WASHINGTON: Some Federal Reserve (Fed) officials have begun suggesting in recent days that productivity growth from artificial intelligence (AI) could mean higher interest rates, a view that would put them at odds with the Trump administration and its nominee to lead the US central bank.
“I expect that the AI boom is unlikely to be a reason for lowering policy rates,” Fed governor Michael Barr said in remarks prepared for a speech in New York.
Barr’s comments followed remarks from Fed vice-chair Philip Jefferson, who argued in a Feb 6 speech that “all other things being equal, persistent increases in productivity growth are likely to result in an increase in the neutral rate, at least temporarily”.
AI and productivity are likely to take on increasing importance this year in debates over interest rates as President Donald Trump continues to put pressure on the Fed to reduce borrowing costs. — Bloomberg
