The Federal Reserve is currently conducting an investigation into the potential impact of generative artificial intelligence (AI) on productivity, inflation, and the labor market. During a panel discussion at the European Central Bank’s Forum on Central Banking in Portugal, Fed Chair Jerome Powell announced that significant investments being made in AI suggest that something big is on the horizon.
Powell mentioned that it is still too early to determine whether the adoption of AI technology will result in job loss, augmentation of existing jobs or creation of new ones. He stated that central banks may not have much influence over these outcomes but are actively engaging with experts to understand the potential impact on productivity, inflation, growth, and displacement.
The Federal Reserve has dedicated a considerable amount of time and effort to researching the possible effects of AI. While they are not currently using generative AI, they are closely examining other forms of AI and may consider using them in the future. In January, the International Monetary Fund (IMF) reported that AI could have a significant impact on employment in advanced economies, with 60% of jobs potentially being affected by AI technology.
According to IMF report half of these jobs may benefit from AI integration while other half may see human tasks being replaced by AI applications potentially leading to lower labor demand, reduced wages and decreased hiring. Citi also published a report in June stating that over half of all finance jobs could be impacted by AI with other industries like insurance energy capital markets also having high potential for automation.
In conclusion, the rise of AI technology has the potential to significantly transform various industries and the labor market raising questions about productivity inflation growth and displacement. The Federal Reserve and other financial institutions are closely monitoring these developments to better understand and prepare for the implications of AI technology.
