{"text":[[{"start":6.05,"text":"AI promises to boost productivity, but its impact on inflation remains a bit of a black box. That has not stopped tech optimists — across Silicon Valley and Wall Street — from calling on the US Federal Reserve to already incorporate AI’s cost-cutting potential into its monetary policy. The head of Northern Trust’s asset management unit told the FT this week that the technology will be “massively disinflationary” and that the central bank should “hold steady” on rate decisions. Kevin Warsh, Donald Trump’s nomination to be the Fed’s next chair, has also argued that AI can ease price pressures, enabling the rate cuts that the president desperately wants. "}],[{"start":48.9,"text":"In theory, they have a point. AI can automate administrative tasks, produce content in seconds and analyse company data. This can boost the productivity of existing workers, raise supply, and push down the price of products and services — and it can enable businesses to save on labour costs. Changes to the Fed’s rate policy filter through to households and businesses with a long lag. So, it makes sense for central bankers to at least consider the forthcoming impact of large language models on economy-wide efficiency gains and prices. "}],[{"start":82.69999999999999,"text":"But in practice, making actual monetary policy adjustments today based on the promise of AI is a shot in the dark. For a start, LLMs are still evolving and use of the technology in business is not yet widespread. Fewer than one-fifth of US companies had adopted it by the end of 2025, according to the Census Bureau data. It will take further time for boardrooms to optimise its usage in their organisations. Though some companies have cited automation as the reason for redundancies, a recent global study found over 80 per cent of senior executives reported no impact of AI on their company’s employment or productivity so far. "}],[{"start":123.14999999999999,"text":"Over time the efficiency gains are expected to become clearer across industries. But their impact on prices will depend on how fast adoption takes place, and what share of the efficiencies are passed on to consumers. Assuming there is a productivity boost that raises incomes, and that many of those made redundant by the technology find roles in new sectors and occupations — as happened with past inventions — then demand and price pressures could rise in the long run. As research by the Bank for International Settlements concludes, the overall impact of AI on inflation depends on the relative size of these potential boosts to supply and demand. "}],[{"start":164.29999999999998,"text":"In the interim, the infrastructure and cyber security investments needed to support the adoption of AI will provide an uplift to inflation. Capital expenditure on data centres — which among the so-called hyperscalers is projected to reach around $700bn this year — and highly valued tech stock prices are supporting US demand. The power requirements for training models and inference may put pressure on energy prices too."}],[{"start":190.14999999999998,"text":"Even if AI does in time prove to be deflationary, there are other inflationary dynamics central bankers need to weigh. Will ongoing geopolitical ructions make supply shocks a norm? Will spending on ageing populations and defence raise demand? What all this means for the “neutral interest rate” — at which monetary policy is neither expansionary nor contractionary — is anyone’s guess. All else being equal, a tech-led growth boom could in fact raise this rate. "}],[{"start":217.34999999999997,"text":"Central bankers should be closely monitoring how AI is being adopted and how it is affecting productivity, as Warsh admitted in his hearing with the US Senate Banking committee on Tuesday. Policymakers are also sensibly embracing the technology to support internal analysis. Still, while LLMs are set to be transformative, their overall impact on prices remains far too uncertain to confidently shape interest rate decisions today."}],[{"start":247.84999999999997,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1776922697_2845.mp3"}