FRANKFURT: The European Central Bank (ECB) must weigh how the artificial intelligence (AI) boom is tightening financing conditions, chief economist Philip Lane says.
In a speech in Dublin on Tuesday, he observed how the hype around the technology is impacting world markets and borrowing costs, with expectations of greater productivity in the long run “plausibly contributing to the global increase in long-term interest rates”.
“Especially since the scale of the European AI boom is not of the same order as the global AI boom, the spillover to the eurozone bond market means that the increase in long-term interest rates constitutes a material tightening of financial conditions for the eurozone,” he said.
“This is a relevant factor for the ECB in determining the appropriate monetary policy stance.”
His remarks reiterate the challenge for policymakers at present in fully gauging the extent to which borrowing costs may encourage or restrict growth at a time when the global backdrop appears to be shifting. — Bloomberg
