Federal Reserve Vice Chair Philip Jefferson said artificial intelligence could gradually raise productivity, while emphasizing that its economic effects remain uncertain. He noted that companies are investing heavily in data centers and AI infrastructure, stimulating demand now while productivity gains may take years to materialize. This sequence could create short-term inflationary pressure, particularly as inflation has remained above the Fed’s 2% target for more than five years. Jefferson also said that sustained productivity growth above the long-term average of 1.5% could temporarily lift the neutral interest rate, making monetary policy less restrictive than it appears. He discussed these issues across four speeches between November 2025 and October 2026, describing AI as a structural shock whose effects on inflation and monetary policy remain difficult to predict.
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