Federal Reserve Chairman Kevin Warsh addressed the Jackson Hole Economic Policy Symposium, marking his 100th day in the role. During his remarks, Warsh discussed the potential impact of artificial intelligence on the economy and outlined principles for future monetary policy.
Warsh noted that progress in artificial intelligence is occurring faster than previously predicted. He stated that the Federal Reserve is monitoring how AI might act as a new factor of production, potentially influencing productivity and the relationship between capital and labor. To study these matters, the Fed is utilizing a task force on productivity and jobs.
Regarding monetary policy, Warsh expressed a preference for a more limited use of forward guidance. He suggested that overcommitting to future decisions can create ambiguity and inhibit the ability of policymakers to respond to changing conditions. He emphasized that transparency should serve the responsibility of getting monetary policy right rather than being an end in itself.
In his assessment of the current economy, Warsh observed that business capital expenditures are rising rapidly, with more than half of the growth this year attributed to AI-related buildout. He noted that corporate profits for S&P 500 firms have grown by more than 20 percent over the past year. While he described the labor market as stable with a jobless rate of 4.1 percent, he noted that inflation remains a primary concern.
Warsh stated that the 12-month change in the PCE price index stands at 3.7 percent, which is above the Federal Reserve's 2 percent target. He noted that while inflation has fallen from its 2022 peaks, progress has been modest. He emphasized that the Fed's objective is to ensure underlying inflation moves toward the target at a sufficient speed.
Warsh concluded by stating his commitment to discipline rather than specific decisions. He expressed a determination to use the best available data to support economic prosperity and maintain the credibility of the Federal Reserve.
