FEDERAL Reserve Governor Michael Barr said although artificial intelligence will transform economies, there are a range of outcomes as to how that will play out.
Barr, in remarks prepared for a speech on Wednesday at the Singapore FinTech Festival, outlined two basic scenarios. In the first, adoption of generative AI could augment existing tasks and roles.
In the second, it could lead to a transformative impact, where work and leisure undergo radical change that boosts efficiency and remakes firms with new business models.
“Right now, it is difficult to predict which scenario (or perhaps one or more intermediate scenarios) will come to pass,” he said.
Fed officials elected to cut their benchmark interest rate at each of their last two policy meetings following a sharp slowdown in hiring over the summer.
Recent public comments indicate they are divided over the need for a third reduction in December, though investors are betting on one, according to futures.
In his speech, Barr pointed to a New York Fed survey showing AI has led employers to scale back hiring plans – a development the Fed governor suggested may be contributing to slower levels of job creation – though he didn’t comment on the near-term outlook for monetary policy.
He also pointed to the possibility that the trillions of dollars in planned capital investment into data centres could drive significant economic change, including productivity gains.
“Investment in capital generally raises labour productivity and offers the potential for higher output growth without pressure on inflation over the longer term,” Barr said. “As I have discussed in previous remarks, if these changes are significant, they can also affect the conduct of monetary policy.” BLOOMBERG
Decoding Asia newsletter: your guide to navigating Asia in a new global order. Delivered to your inbox. Free.