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The Federal Reserve is actively exploring the potential effects of generative artificial intelligence (AI) on productivity, inflation, and the labor market, according to Fed Chair Jerome Powell. During a panel discussion at the European Central Bank’s Forum on Central Banking in Portugal on July 2, Powell noted the significant investments in AI, indicating a major technological shift on the horizon.
Powell emphasized that it is still uncertain whether AI will lead to job losses, enhance current roles, or create new employment opportunities. “There’s not a lot a central bank can do about that,” Powell said. “But, like everybody else, we’re consulting with experts and examining the potential impacts on productivity, inflation, growth, and job displacement.”
The Federal Reserve is dedicating substantial time and resources to understand AI’s potential impacts. Although it is not currently utilizing generative AI, Powell mentioned that the Fed is closely monitoring other forms of AI for possible future applications.
The International Monetary Fund (IMF) highlighted in January that AI’s impact on employment will be particularly significant in advanced economies. Approximately 40% of global employment is susceptible to AI, but this figure rises to 60% in advanced economies. According to an IMF blog post on January 14, half of these jobs may benefit from AI integration, while the other half could see key tasks currently performed by humans being taken over by AI applications. This shift could result in reduced labor demand, lower wages, and decreased hiring.
In a report from June, Citi projected that AI could impact over half of all finance jobs, with 54% having a high potential for automation and another 12% potentially augmented by AI. Other industries with significant automation potential include insurance (46%), energy (43%), and capital markets (40%).
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