Federal Reserve Chairman Kevin Warsh faced scrutiny from lawmakers on Wednesday as he defended his view that artificial intelligence investment is a key driver of disinflation.
During a Senate committee hearing, Warsh sought to reassure critics who have questioned his independence and policy approach, emphasizing that the central bank remains data-dependent.
The exchange highlights the growing tension between the Fed’s traditional monetary framework and the structural economic shifts driven by technology.
Warsh’s testimony comes as markets continue to price in a cautious approach to interest rates, with traders weighing the potential for AI to permanently lower inflation against near-term economic data.
In previous statements, Warsh had pledged to "get monetary policy right" and suggested that inflation could become a "thing of the past" due to the efficiency gains from AI.
However, his recent communications indicate a more nuanced stance, acknowledging the uncertainty surrounding the speed and magnitude of these technological impacts.