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

Odaily Planet Daily News Federal Reserve's Musalem stated that policymakers cannot rely on the potential productivity boom from artificial intelligence to alleviate persistently high inflation. Musalem pointed out: "I believe it would be very 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 levels remain persistently high, further interest rate hikes may be necessary.

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