Kevin Warsh, Donald Trump's nominee for Federal Reserve chair, argues that the artificial intelligence boom marks the most powerful wave of productivity growth in modern times. But as economists parse what that means for inflation and interest rates, many question whether his optimistic outlook supports a risky return to looser monetary policy.
"If we've learned anything in economics, what we've learned is productivity gains are the predecessor to wage gains," Warsh said in a December 4, 2025, interview with Sadi Khan, CEO of Aven Financial.
"This is the most productivity-enhancing wave of our lifetimes, past, present, and future."
Warsh's comment reflects faith in generative AI as a driver of long-term economic efficiency—a view that might align with lower interest rates. Yet a recent survey of 45 economic academics by the Financial Times and the University of Chicago's Clark Center for Global Markets suggests the AI boom may not suppress inflation enough to justify aggressive easing.
According to the survey results, 58% of respondents said the likely effect of the AI surge on PCE inflation—the Fed's preferred measure—would be 0.2% or less. Another 24% expected a modest annual uptick of up to 0.5%, while just 13% foresaw inflation falling by more than 0.2%. Only 4% anticipated a significant increase of at least 0.5%.
"I don't think [the AI boom] is a disinflationary shock," former Fed official and Johns Hopkins economist Jonathan Wright told the Financial Times.
"I don't think—over the near term—it's very inflationary either."
Others see potential volatility.
"The AI boom may generate a booming economy... or we may experience a financial market crack-up," said Robert Barbera, director of the Center for Financial Economics at Johns Hopkins.
Fed leaders, meanwhile, are cautious. In a February 6, 2026, speech at the Brookings Institution, Vice Chair Philip Jefferson noted that "excitement about the potential of AI" is already fueling data center construction and related investment. He warned that this surge in demand "could raise inflation temporarily, absent offsetting monetary policy actions."
Trump has publicly urged the Fed to cut its benchmark rate to 1%, close to pandemic-era lows. But the Federal Open Market Committee in December projected only one 25-basis-point cut for 2026—keeping the rate above 3.25%.
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