Former Fed Vice Chair: AI's Impact on Inflation and Jobs Needs More Research

Donald Kohn, former vice chairman of the Federal Reserve, said in a recent group interview that the intersection of AI technology and the labor market requires more research, as its implications remain uncertain.

Kohn noted that in the medium term, AI is boosting demand for goods and services faster than it increases supply. Infrastructure development supporting AI is creating significant demand for capital equipment and labor, adding to price pressures in an economy near full employment. He cited this as one reason the Fed had to begin tightening monetary policy.

He also highlighted the complex interaction between AI and the labor market, including job displacement and the need for workers to acquire new skills. Concerns about AI's impact on jobs may also be dampening wage demands, he said.

Regarding Fed Chair Warsh's reform plans, Kohn said establishing working groups to bring in outside perspectives is a good idea, but the effects remain to be seen and it is too early to judge.

Kohn also addressed the Middle East conflict as a key driver of imported inflation via higher oil prices. As for reports that Russia might release diesel inventories, he said the reported volumes would be too small to affect prices, and such a move seemed politically unlikely.