Fed Chair Predicts AI Will Create Jobs as Inflation Risks Ease

Federal Reserve Chairman Kevin Warsh stated on Wednesday that inflation risks have declined in recent weeks, but the central bank still has work to do to control rising prices. Speaking at the European Central Bank Forum in Sintra, Portugal, Warsh noted that energy prices have dropped substantially since the U.S. and Iran signed a memorandum of understanding to end the war last month.

Inflation remains a concern for Americans, with the Consumer Price Index rising to 4.2% in May, its highest since 2023. However, Warsh expressed optimism about artificial intelligence's impact on the economy, predicting it will create jobs rather than destroy them. "Who knew when the internet was born that it would create a million and a half jobs as Uber drivers? We are in the first or second inning of this revolution," he said.

Warsh emphasized that the AI boom is driving capital expenditures in cloud computing and data centers, which could eventually boost supply and ease inflation. He refrained from hinting at future interest rate moves, stating, "I'm not going to give you any prediction as to what we will do."

On central bank independence, Warsh affirmed, "We've been an independent central bank for a very long time. We're going to be an independent central bank at this moment." The Fed's next rate-setting meeting is scheduled for July 28-29.

European Central Bank President Christine Lagarde agreed that inflation risks are now more balanced due to falling energy prices. The ECB has raised rates since the Iran conflict, while the Fed has held steady.

Warsh noted that labor markets remain steady and the demand side of the economy is solid, but prices are still too high. He reiterated the Fed's commitment to price stability.