ECB’s Panetta: How AI Gains Will Influence Inflation, Demand, and Central Banks
The Impact of Artificial Intelligence on Central Banking and the Economy
AI’s Role in Shaping Economic Outcomes
MILAN, Sept 21 (Reuters) - Central banks need to understand who benefits from artificial intelligence-driven gains, as their distribution will help shape aggregate demand and inflation, European Central Bank Governing Council member Fabio Panetta said on Monday.
Transformations in Productivity and Financial Systems
• AI is set to transform productivity and growth, labour and financial markets, and payment systems, Panetta said.
Potential Scenarios: Inflationary and Disinflationary Pressures
Increased Demand and Inflation
• If AI mainly creates new tasks and raises expected labour income, demand could increase before AI's full productivity benefits materialise, prolonging inflationary pressures, he added.
Disinflationary Effects of Automation
• According to Panetta, if automation dominates, weaker consumption could cause the disinflationary effects of AI to emerge sooner.
Central Bank Credibility Amid AI Advancements
The Importance of Credibility
• Panetta, who is also governor of the Bank of Italy, was speaking at an event hosted by the National Bank of Ukraine.
• Credibility is an essential asset of every central bank, but how it is built and preserved depends on the nature of the challenges faced, he said.
Adapting to Change
• Central banks cannot remain on the sidelines, Panetta said, adding that understanding changes underway is increasingly essential to central bank credibility.
(Reporting by Sara Rossi; Editing Gianluca Semeraro and Jamie Freed)
