Fed's Warsh says AI price surge is real but not inflationary

Investing.com -- Federal Reserve Chairman Kevin Warsh told lawmakers today that artificial intelligence-driven investment is pushing prices higher but will not create inflation. Speaking before the Senate Banking Committee, Warsh said the central bank will determine whether the price changes become inflationary.

"I don't view a one-time change in prices as necessarily being inflationary because I think there's a supply response; in that way this is different from a foreign conflict and what it might do, which tends to reduce the supply side of the economy," Warsh said. He added that prices may rise over the next 12 months but noted that whether this becomes inflationary depends on Federal Reserve action.

The Fed chairman said artificial intelligence will create jobs in both the short and long term, though the medium-term impact on employment could be disruptive. Warsh told the committee he cannot guarantee there will be no disruption or provide comfort on jobs in the short term.

Warsh said wages have grown at a reasonable pace but called the timing of when wages will increase more from productivity gains a "puzzle." He confirmed that the surge in prices from AI is real but pointed to business capital investment contributing substantially to GDP, a trend he expects to continue.

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