Powell Says Fed Has Limited Tools To Prevent AI Disruptions to Economy

Chairman Jerome Powell says the Federal Reserve might not be able to rescue the economy from a major disruption by generative AI. “When there are structural changes in the economy, there’s not a lot that an interest rate change can do for that,” Mr. Powell said during a question-and-answer session at an economic outlook event at Warwick, Rhode Island, on Tuesday. He says the burden of dealing with AI will fall on lawmakers.Mr. Powell says that generative AI “clearly” has the hallmarks of an emerging technology that could be very important to the American economy and society. He did add that it is way too early to know if it will be a major disruptive force. Mr. Powell says companies are still in the experimental phase with AI.“The history is always that there is a lot of fear that technological innovation will eliminate a lot of jobs,” Mr. Powell said. “What has tended to happen in history over time is that it just raised productivity and created new jobs.”Mr. Powell says that some jobs will be phased out by AI, some will evolve, and new jobs will be created. But he says that AI may be making the job market more challenging for recent college graduates even if it is not yet a major force in the overall job market.As for a timeline on AI being having a wider employment impact, Mr. Powell says he can’t make any predictions. “It’s hard, quite hard, to say,” he said.In remarks before answering questions, Mr. Powell explained the rationale for the quarter point interest rate cut he announced last week.Mr. Powell says that there has been a marked slowing in both the supply and demand for workers and the downside risks to employment have risen. That’s why the Fed cut the rate despite inflation remaining elevated above the Fed’s targeted 2 percent level.The Fed chairman says the overall economic effects of the significant changes in trade, immigration, fiscal, and regulatory policy remain to be seen on the economy and will be monitored to decide on future rate cuts.But Mr. Powell indicated that the Fed would move slowly on rate cuts, a contrast with other Fed officials who have called for rapid cuts.Reiterating comments that there was no risk-free path, Mr. Powell said, “If we ease too aggressively, we could leave the inflation job unfinished and need to reverse course later to fully restore 2 percent inflation.”

Powell Says Fed Has Limited Tools To Prevent AI Disruptions to Economy

Powell Says Fed Has Limited Tools To Prevent AI Disruptions to Economy

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