Federal Reserve Governor Lisa Cook shared her outlook that artificial intelligence (AI) could drive a significant increase in productivity, but expressed uncertainty about the extent and timing of this impact. Cook, who spoke at a conference organized by the Federal Reserve Banks of Atlanta, Boston, and Richmond, highlighted that while AI holds immense potential, the specifics of how and when it will influence the broader economy remain unknown.
Cook emphasized that an acceleration in productivity, powered by advances in AI, could act as a “counterweight” to rising inflationary pressures. In her view, higher productivity could allow wages to grow without contributing to inflation, a crucial factor in maintaining economic stability. However, she also stressed the substantial uncertainties that cloud this forecast, reflecting both optimism and caution about the implications of AI-driven technological changes.
“Looking ahead, I anticipate an acceleration in productivity grounded in the impressive advances in AI, but substantial uncertainty attends that forecast,” Cook noted during the conference. The unpredictability of AI’s impact, including the magnitude of productivity gains and which sectors or workers might be most affected, makes it difficult to forecast with precision.
As a former economics professor with a research background in innovation, Cook acknowledged the promising role AI could play in boosting efficiency in labor markets. “As firms deploy these technologies and workers discover ways to make use of them, such developments can create the conditions for greater productivity and thus higher wage growth consistent with stable prices,” she added.
However, Cook reiterated that despite the potential, there remains a “tremendous uncertainty” surrounding the ultimate effects of AI on both U.S. and global labor markets. “We still do not know what the magnitude or intensity of these effects will be, which workers and firms will be most affected, how big the increase in productivity might be, or even the period over which these effects will be realized,” she explained.
While Cook avoided commenting on monetary policy during her remarks, her comments align with the Federal Reserve’s broader focus on monitoring AI’s role in reshaping labor markets and inflation trends. She was among the majority of Federal Open Market Committee members who voted for a half-point interest rate reduction in the Fed’s most recent meeting.
The conference in Atlanta is scheduled to include additional insights from other Federal Reserve policymakers, including Atlanta Fed President Raphael Bostic, Boston Fed’s Susan Collins, and Richmond Fed’s Thomas Barkin. Their discussions will likely provide further perspectives on how the central bank views AI’s role in the evolving economy.
Expanded Analysis:
AI is increasingly being seen as a transformative force in sectors ranging from manufacturing to financial services. For investors, this signals a dual opportunity: first, in companies leading AI development, and second, in industries that are expected to see productivity improvements due to AI. For instance, firms that adopt AI early could see significant cost savings and efficiency gains, translating into improved earnings. This could drive sectoral shifts in stock performance, particularly in technology and services sectors.
However, as Cook pointed out, the uncertainties surrounding the full scale of AI’s impact also present risks. AI adoption could lead to disruptive shifts in labor markets, with certain jobs becoming obsolete while new ones are created. For businesses and policymakers, the challenge lies in balancing these changes without exacerbating inflation or inequality.
The economic potential of AI, particularly in its ability to enhance productivity and wage growth without increasing inflationary pressures, makes it a focal point for both investors and policymakers. Understanding the timing and sectors most affected by AI could help businesses and investors better navigate these shifts, maximizing returns while managing risk.
