The Governor of the Bank of Canada, Tiff Macklem, has warned that the rapid adoption of artificial intelligence (AI) could spark inflation in the near future.
“AI adoption may add inflationary pressure in the short term,” Macklem stated during the Artificial Intelligence Economics Conference hosted by the National Bureau of Economic Research on September 20, 2024.
Macklem explained that while AI has the potential to boost productivity in the long run, it is currently driving demand more than supply.
“Demand for infrastructure, skilled labor, and AI services has surged, while supply has struggled to keep pace. This is pushing prices higher,” said Macklem.
He also highlighted that the economic effects of AI are already evident in various digital sectors, where companies more reliant on technology are adjusting prices more frequently, which could make inflation more volatile.
Concerns Over Financial Stability and Jobs
In addition to inflation, Macklem expressed concerns about AI’s impact on financial stability.
“Banks and financial institutions are increasingly relying on AI to enhance efficiency and risk management. However, there’s a significant risk if third-party AI service providers fail, as the consequences could ripple quickly through the financial system,” he warned.
AI could also disrupt the labor market. Macklem cautioned that AI-driven automation may replace jobs that were previously done by humans, especially in low-productivity sectors.
“As AI becomes more integrated into the economy, we may witness more job losses than job creation in certain sectors,” Macklem added.
Central Banks Must Adapt
To tackle AI’s impact, Macklem emphasized that central banks need to proactively adjust their monetary policies.
The Bank of Canada, for example, has already started using AI to predict inflation, track economic activity, and analyze large datasets more efficiently.
“While AI offers significant benefits, we must adopt it cautiously. The impact of AI on inflation and productivity remains highly uncertain, so we need to closely monitor these developments,” Macklem concluded.
Follow our Twitter : https://x.com/safubit
Read : Satoshi Nakamoto’s Bitcoin Wallet Reawakens After 14 Years! (dinodapps.com)
