Federal Reserve's Musalem: Cannot Rely on AI Boom to Solve Inflation Issues

Odaily News Federal Reserve's Musalem stated that policymakers cannot rely on potential productivity booms from artificial intelligence to alleviate persistently high inflation. Musalem pointed out: "I believe it would be highly risky to count on improved future productivity growth prospects to solve our current inflation problems." The conflict with Iran has rekindled upward price pressures and prompted more policymakers to warn that if inflation remains persistently high, further interest rate hikes may be needed.

Musalem warned that after adjusting for inflation, the Federal Reserve's benchmark interest rate is currently below the so-called "neutral level"—a level that neither suppresses nor stimulates the economy. He also noted that the labor market remains stable, inflation is "significantly above" the Fed's 2% target, and long-term inflation expectations are showing a "gradual upward" trend. (Jin Shi)