Federal Reserve Chair Jerome Powell discussed the early stages of generative AI and its potential to significantly boost productivity over the next decade, while acknowledging skepticism about overly optimistic projections. He emphasized that the Fed’s focus remains on short-term economic stability, as the tools available do not directly influence long-term productivity trends shaped by technological advancements.
In a recent discussion, Federal Reserve Chair Jerome Powell addressed the topic of generative artificial intelligence (AI) and its potential impact on productivity. He noted that while traditional AI has been widely adopted by companies of various sizes, generative AI is still in its early stages of development and deployment. Many banks and companies are aware of the technology but have not yet integrated it into their operations, largely due to concerns about associated risks.
Powell highlighted that credible estimates suggest generative AI could lead to a significant increase in productivity over the next decade. However, he also acknowledged the presence of skeptics who believe these projections may be overly optimistic. Historically, technological innovations often take time to reflect in productivity statistics, with their effects appearing later and sometimes more pronounced than initially expected. This pattern may hold true for generative AI, which has the potential to automate tasks currently performed by humans, including those requiring higher education.
When asked how generative AI influences his thinking on monetary policy, Powell indicated that it does not have immediate implications. The Federal Reserve’s primary focus remains on achieving maximum employment and price stability, which are short-term goals. He emphasized that the tools available to the Fed are not designed to directly influence long-term productivity trends, which are shaped by broader technological advancements.
Powell reiterated that the best approach the Federal Reserve can take to support technological evolution is to maintain macroeconomic stability. This includes ensuring price stability and fostering a strong, stable labor market. By creating an environment where businesses can thrive, the Fed can indirectly support the conditions necessary for innovation and productivity growth.
In conclusion, while generative AI holds promise for future productivity gains, its current stage of development means that its effects are not yet felt in the economy. Powell’s insights reflect a cautious optimism about the technology’s potential, balanced with an understanding of the complexities involved in measuring its impact on productivity and the economy as a whole. The Federal Reserve’s focus remains on short-term economic stability, with an eye toward the longer-term implications of technological advancements.