San Francisco Fed President Daly: Transformational AI technology may boost the economy without raising inflation, and the Federal Reserve needs to catch signals early.

San Francisco Fed President Daly said that while there is currently insufficient evidence to show that artificial intelligence (AI) has fundamentally changed the US economy, policymakers must maintain an open attitude towards the potential impact of this new technology and promptly capture relevant signals. Daly pointed out on Tuesday that the development potential of AI is obvious, but it remains to be seen when and how it will have a profound impact on the economy. "Seeing the possibilities is not difficult, what is really difficult is judging how these changes will evolve and when." Daly reviewed former Fed Chairman Greenspan's foresight on computers and the internet in the 1990s. Greenspan had pointed out that new technology would profoundly change work and business models, driving economic growth without causing inflation. Daly believes that artificial intelligence may follow a similar path, but its comprehensive impact may take longer to manifest in macroeconomic data. She emphasized that policymakers need to "see the signs of change earlier" before technological changes are fully reflected in overall economic indicators, which means delving into more segmented data to capture clues of impending structural transformation. Currently, Fed officials are trying to assess the potential impact of artificial intelligence on the economy and productivity growth. Productivity is seen as a key "cure" for achieving economic expansion without triggering higher inflation. Differences are emerging on this issue. Powell, who has been nominated by US President Trump to be the next Fed chairman, believes that AI is reshaping the economic structure, and the Fed needs to address this change. He and some others argue that if AI leads to prosperity in productivity, policymakers should correspondingly lower interest rates. On the policy front, the Fed chose to hold rates steady last month after three consecutive rate cuts. Prior to this, the Fed had cut rates three times by the end of 2025 to boost a weakening job market. Daly said she supported the decision to keep rates unchanged last month but still expects one to two more rate cuts this year. The latest data also provides background for policy discussions. A report released by the US Bureau of Labor Statistics on February 11th showed that recruitment activity in the US rebounded significantly in January, with the largest increase in employment in over a year, indicating a certain rebound in the labor market at the beginning of the year.