San Francisco Federal Reserve President Mary Daly told attendees at a Bloomberg Tech event in San Francisco that artificial intelligence could help push inflation lower over a five- to 10-year period, but she stressed that the potential long-term disinflationary effect does not alter the Fed's near-term policy calculus.
Daly explained that the Federal Reserve frames policy around a roughly 12-month horizon, a cadence that makes longer-run structural developments less central to immediate interest-rate decisions. In that context, she said the prospect that AI-driven productivity gains might eventually lead to lower prices is not a pressing consideration for current monetary-policy choices.
The Fed official was explicit that AI is not playing a meaningful role in today's inflation. She pointed instead to tariffs as the primary contributor to elevated price pressures at present, along with higher energy and food costs tied to the Iran war. Daly noted that oil price increases are feeding through into both energy and food prices.
On the subject of productivity, Daly acknowledged evidence that AI has improved output at specific companies and within some sectors. However, she said those improvements have not yet materialized broadly across the economy. As a result, the aggregate productivity gains necessary to produce sustained downward pressure on inflation remain prospective rather than current.
Daly also addressed the labor implications of generative AI, observing that it is commonly being deployed to augment workers rather than replace them. She argued that, over time, productivity improvements from AI should make deflation possible, but she underscored that the timing of such effects is uncertain and therefore crucial to whether they influence policy actions.
In short, Daly characterized AI as a potential long-run disinflationary force visible in isolated cases today, but not yet a scalable or timely factor for the Federal Reserve's one-year policy horizon. Meanwhile, she identified tariffs and energy-related price pressures as the drivers of current inflation dynamics.