Federal Reserve Governor Michael Barr recently asserted that the surge in artificial intelligence (AI) will not lead to lower policy rates, challenging the notion of AI as a productivity booster. While optimistic about AI’s long-term benefits, he cautioned that it could disrupt the job market and contribute to inflation, especially amid increased energy demands from data centers. Barr emphasized the need for tangible evidence of declining goods price inflation before considering any rate cuts, aligning with other Fed officials who also advocate for monitoring inflation closely. Despite predictions of a 2.9% rise in the Personal Consumption Expenditures Index, he warned of persistent inflation risks above the Fed’s 2% target. Barr highlighted the delicate balance in the job market, noting AI’s potential to either enhance productivity without massive job losses or lead to significant displacement, calling for proactive investments in workforce training and job creation to mitigate adverse effects.
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