Mary Daly, President of the San Francisco Federal Reserve, stressed that the central bank must ensure inflation continues to move sustainably lower. While advances in artificial intelligence could boost productivity and ease price pressures over time, she emphasized that maintaining a modestly restrictive monetary policy remains important to prevent inflation from resurging.
Daly noted that there is currently limited macroeconomic evidence of a major AI-driven productivity surge. She suggested that the full impact of the technology may take time to appear in broad economic data. Drawing a parallel to the 1990s tech boom, she recalled how strong growth coexisted with contained inflation during that period.
She added that the Federal Reserve must carefully assess whether stronger economic growth reflects healthy supply-side improvements or signals renewed inflationary pressures. Policymakers, she said, need to balance what they know from current data with the uncertainties that still surround technological and economic shifts.
On the labor market, Daly highlighted vulnerabilities such as job growth being concentrated in a few industries. Businesses, while cautiously optimistic about demand, remain hesitant to expand hiring as they evaluate how artificial intelligence may reshape workforce needs and how long current demand levels will last.
Overall, Daly’s remarks suggest that the Federal Reserve is navigating a delicate balance between inflation control, technological transformation, and labor market dynamics. For now, holding rates steady appears to be the priority, but future decisions will depend on incoming inflation data, economic growth trends, and labor market developments.
