Fed's Daly says AI may lower inflation in 5-10 years

Investing.com -- San Francisco Federal Reserve President Mary Daly said Thursday that artificial intelligence could reduce inflation over a five- to 10-year period, but the effect is not a pressing concern for current monetary policy decisions.

Speaking at a Bloomberg Tech event in San Francisco, Daly explained that monetary policy operates on a 12-month timeframe, making the longer-term deflationary potential of AI less relevant to immediate policy decisions.

Daly said AI is not contributing to current inflation levels. She identified tariffs as the primary driver of inflation, along with higher energy and food prices stemming from the Iran war. Oil prices are pushing up energy and food costs, she noted.

The Fed official said evidence exists of AI-driven productivity gains in specific firms and sectors, but these gains have not yet appeared at scale across the economy.

Daly added that generative AI is currently being used to supplement workers rather than replace them. She said productivity gains from AI should eventually allow for deflation, but timing remains the key factor.

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