(Bloomberg) — The implications of artificial intelligence gripped global central bankers in Iceland this week, with one Federal Reserve official joking that it won\u2019t put economists out of business.<\/p>\n
Most Read from Bloomberg<\/p>\n
The program of the conference that ended on Friday in Reykjavik didn\u2019t even mention the technology, but time and again, policymakers returned to musing about how it will affect labor markets, productivity and inflation, for better and for worse.<\/p>\n
\u201cThe demand for macro economists will still be vibrant,\u201d said New York Fed President John Williams, sparking laughter from an audience that, during the two-day event, included chiefs from the Bank of England, the Reserve Bank of India and the Swiss National Bank.<\/p>\n
The debate showcased how, in tandem with the way it has fired up equity markets, AI has become the most engaging intellectual matter of the moment for central bankers even as they navigate a global energy shock, a shift in policy direction for many of them and a realignment of bond markets toward the highest yields in decades.<\/p>\n
Williams offered the most optimistic take on the promises offered by the technology, compared with remarks to the conference by Fed colleagues Alberto Musalem and Jeffrey Schmid. He spoke months after worries about a vicious spiral of job cuts briefly spooked equity markets.<\/p>\n
\u201cHistory has taught us that you can have higher and higher productivity, higher and higher standards of living, without structural unemployment,\u201d the New York Fed chief said. \u201cI\u2019m not a believer that we\u2019re going to have long-term structural unemployment.\u201d<\/p>\n
Given the US economy\u2019s role at the heart of the AI revolution, the Fed finds itself at the center of the debate. Its new chairman, Kevin Warsh, last year suggested an AI-driven productivity surge could allow the central bank to keep rates lower than it otherwise would, just as former Chairman Alan Greenspan argued in the 1990s at the advent of the internet age.<\/p>\n
Other Fed officials don\u2019t seem so sure. Musalem, president of the St. Louis Fed, became the latest US policymaker to push back on that notion by worrying aloud to the Reykjavik conference about possible inflation.<\/p>\n
\u201cThe demand pressures associated with the AI boom are very real,\u201d he said. \u201cWe see them in the data center buildout, the demands for electricity and memory chips, and the buoyant share prices of AI companies that are helping propel consumer spending.\u201d<\/p>\n
Story Continues <\/p>\n
He cautioned that it\u2019s risky, from an inflation perspective, to bank on the prospect of future productivity growth.<\/p>\n
\u201cTo borrow Robert Solow\u2019s famous observation about the computer revolution in the 1980s, today we see AI everywhere but in the aggregate productivity statistics,\u201d Musalem said.<\/p>\n
Schmid, the Kansas City Fed chief, wondered about the implications for jobs. He observed that reports from his district don\u2019t necessarily point to AI replacing workers, but that anecdotal evidence suggests it is replacing hiring.<\/p>\n
\u201cMost industries have seen a decline in headcount over the past year, independent of their rate of AI adoption,\u201d he cautioned. \u201cThis suggests a more general phenomenon behind the weakness of hiring.\u201d<\/p>\n
Williams suggested that whatever its consequences, AI will force a range of adjustments in the labor market, though again he offered a positive spin.<\/p>\n
\u201cWe\u2019ll have to basically retrain employees and train people to use these skills,\u201d he said. \u201cBut also people coming out of school today are far ahead of us on this already. You look at people who are hired today coming out of college, they\u2019re already using AI tools on a daily basis.\u201d<\/p>\n
Bank of England Governor Andrew Bailey said that, for central banks, AI isn\u2019t just something to study in the economy, but a tool to implement in their organizations. He revealed the BOE\u2019s Monetary Policy Committee is using large language models to predict how their meeting minutes will be received by the market.<\/p>\n
\u201cIt\u2019s helpful to us because it does occasionally throw things up, and it says, \u2018Look, if you do this, this is how it will be received. Is that what you want?\u2019\u201d he said in a Bloomberg Television interview with Stephanie Flanders.<\/p>\n
He added the BOE is increasingly using AI for everything from coding to economic modeling.<\/p>\n
The conference was just one manifestation of the fascination of central bankers with AI and its potential. One official who wasn\u2019t there was Bank of Italy Governor Fabio Panetta, who was busy on Friday delivering a major annual speech in Rome chronicling the country\u2019s economic challenges.<\/p>\n
Despite the International Monetary Fund warning of Italy\u2019s \u201ctoo high\u201d debt, he barely touched on the matter. Instead, he devoted more than 600 words to AI, saying it could boost productivity by as much as 1 percentage point.<\/p>\n
\u201cIn the most favorable scenario, these gains could more than offset the decline in potential output caused by the contraction in the working-age population,\u201d he said. \u201cCombined with higher labor-force participation, this would make durable growth in the Italian economy possible.\u201d<\/p>\n
–With assistance from Alessandra Migliaccio.<\/p>\n
Most Read from Bloomberg Businessweek<\/p>\n
\u00a92026 Bloomberg L.P.<\/p>\n","protected":false},"excerpt":{"rendered":"(Bloomberg) — The implications of artificial intelligence gripped global central bankers in Iceland this week, with one Federal…\n","protected":false},"author":2,"featured_media":453021,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[20],"tags":[365,10293,230467,229071,363,364,9953,902,34136,866,230466,41883,2920,111,139,69,624,6836,230465,66752,145],"class_list":["post-453020","post","type-post","status-publish","format-standard","has-post-thumbnail","category-artificial-intelligence","tag-ai","tag-ai-revolution","tag-alan-greenspan","tag-alberto-musalem","tag-artificial-intelligence","tag-artificialintelligence","tag-bank-of-england","tag-bloomberg","tag-central-bankers","tag-federal-reserve","tag-jeffrey-schmid","tag-john-williams","tag-new-york-fed","tag-new-zealand","tag-newzealand","tag-nz","tag-productivity","tag-reserve-bank-of-india","tag-structural-unemployment","tag-swiss-national-bank","tag-technology"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/453020","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=453020"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/453020\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/453021"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=453020"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=453020"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=453020"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}