The Federal Reserve’s new artificial intelligence task force is made up of people who largely share one view, AI will transform the economy. That could become important as the Fed weighs how AI will affect inflation, productivity and interest rates. Though Fed Chair Kevin Warsh and his hand-picked advisors are optimistic, not everyone at the central bank is convinced the technology’s benefits will arrive as quickly as expected.
Minutes from the Federal Open Market Committee’s June meeting, released this week, showed policymakers discussed whether AI could lift productivity. Some participants agreed that productivity could improve, but they also urged caution.
The AI boom is already affecting parts of the economy. New York Fed President John Williams said Thursday that rising demand for AI infrastructure is pushing up the prices of electricity and semiconductors.
Prices have risen like a “hockey stick,” with some components doubling and tripling, Williams said. AI is a “demand shock,” he told CNBC, adding that it is unclear if supply will grow alongside it, which would be necessary to keep inflation down.
The Fed is widely expected to keep interest rates unchanged at its meeting later this month. The task forces are expected to complete their work by the end of the year.
Warsh picks AI supporters for key task force
The AI panel is one of five task forces the Fed announced on Thursday. Its job is to “assess the economic impact of new general-purpose technologies, including artificial intelligence, to inform the Federal Reserve’s policy judgments.” Warsh personally selected the three outside advisors leading the effort: venture capitalist Marc Andreessen, economist Charles I. Jones and Xbox CEO Asha Sharma.
Warsh believes AI can reshape the economy
Warsh has repeatedly argued that AI could have a major impact on economic growth. Its adoption is “perhaps as important a change in the economy and business and households that we’ve had in my adult lifetime,” Warsh said during his first press conference as Fed chair in June.
He also said in 2025 that AI advances could justify lower interest rates because the technology would allow the economy to grow faster without increasing inflation.
Warsh has known Andreessen personally for decades. After leaving the Fed in 2011, he managed venture capital investments for investor Stanley Druckenmiller, strengthening both his Silicon Valley connections and his personal wealth.
Andreessen and Jones see AI driving faster growth
Andreessen, who made his fortune developing some of the internet’s earliest web browsers, has become one of AI’s strongest advocates. “We’ve turned sand into thought,” Andreessen told podcaster Joe Rogan in May, referring to the silicon used to make AI chips. Jones, who recently took leave from Stanford University to join the Anthropic Institute, has focused much of his recent research on AI’s impact on economic growth.
In a recent paper, Jones said US per-capita growth has averaged about 2% for much of the country’s history. “Nevertheless, if AI eventually automates away nearly all the weak links in the economy, economic growth could accelerate significantly, with rates potentially exceeding 5 percent per year,” he wrote.
The paper also looks at parts of the economy that may be harder to automate and considers slower growth scenarios. Even so, Jones concluded that AI “will likely be the most transformative technology of the modern era.”
Fed Chair Kevin Warsh said Thursday that the new task forces would bring together the “best minds” from outside the central bank. Among the five groups announced, the AI task force could have the biggest influence on how the Fed views future economic growth, productivity and monetary policy.