Artificial intelligence can exert a moderating influence on inflation over a five-to-ten-year horizon, but that factor is not a priority for current monetary policy decisions, Mary Daly, president of the Federal Reserve Bank of San Francisco, said on Thursday at a Bloomberg Tech event. She explained that the Federal Reserve considers a 12‑month horizon when setting interest rates. For that reason, the long‑term deflationary potential of AI carries minimal weight in immediate decisions by members of the Federal Open Market Committee (FOMC).
Daly said that to date, AI technologies have had no impact on current inflation in the United States. She identified tight trade tariffs and continuing increases in food and energy costs amid the prolonged war in Iran as the main drivers of consumer price growth in the country. The San Francisco Fed chief stressed that high global oil prices are exerting the most direct and powerful pressure on energy and basic food costs for American households.
Assessing the economic effect of digitalization, Daly said the Fed has observed local evidence of rising labor productivity from AI in individual firms and IT sectors, but those changes have not yet manifested structurally across the entire US macroeconomy. Moreover, generative AI is currently being used by corporations mainly to support and augment existing workers rather than to replace them en masse. In her view, full productivity gains from AI should eventually create new economic conditions, but that process will require a prolonged period.