The Fed is fixated on AI, but not ready to make a Greenspan-size bet

Like everyone else, policymakers at the Federal Reserve are increasingly obsessed with artificial intelligence and its promise of a turbocharged economy.

- ENDA CURRAN

They're just not ready to make a big call that the revolution is under way.

Analysts across the financial world are scouring data for signs AI is making the economy more productive — the holy grail of new technology. The last sustained boost of that kind was the 1990s internet boom. Back then it shaped Fed policy: Chair Alan Greenspan reckoned innovation would allow faster growth without triggering inflation, and used that argument to keep interest rates down.

Right now, US central bankers are in agreement that AI will be transformative — but essentially in “too early to tell” mode when it comes to how the effects will land. A more immediate concern is above-target inflation, leaving many policymakers opposed to rate cuts. Others put more weight on weak job markets and support further easing: Al’s ability to replace workers is part of that case, but not front-and-center.

Caution is par for the course, because technological leaps often take years to work their way through the economy and show up in data. But the Fed is under pressure at a pivotal time.