Technology

BIS warns that artificial intelligence could complicate central bank decisions

12:39

By: Azzat Manal

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The rapid expansion of artificial intelligence is creating new challenges for central banks as they attempt to assess economic conditions and make appropriate monetary policy decisions, according to a report from the Bank for International Settlements (BIS).

The institution warned that the growing influence of AI is making it increasingly difficult for policymakers to interpret traditional economic indicators. As the technology spreads across industries, financial markets and investment activity, its effects could complicate efforts to distinguish temporary economic changes from longer-term structural shifts.

According to the report, AI is no longer limited to the technology sector. Its impact is increasingly visible in investment, international trade and asset markets, potentially influencing short-term expectations for global economic growth.

The expansion of AI infrastructure has also contributed to a significant increase in investment. In the United States, spending on data centers and information technology manufacturing facilities has reached the equivalent of around 0.8% of gross domestic product, highlighting the scale of resources being directed toward the sector.

At the same time, the BIS noted that AI could eventually help reduce inflationary pressures by improving productivity and increasing the efficiency of businesses. Greater automation and technological advances could allow companies to produce more efficiently, potentially lowering costs over the medium and long term.

The technology could also influence consumer behavior and labor markets. Concerns about potential job losses may encourage households to reduce spending, while weaker bargaining power among workers could limit wage growth. Both developments could contribute to easing price pressures.

However, determining the lasting economic impact of AI remains a major challenge for monetary policymakers. Strong economic growth could initially be driven by a temporary wave of investment and rising asset valuations, without necessarily reflecting sustainable improvements in productivity.

The BIS therefore emphasized the difficulty of separating short-term effects from permanent changes associated with AI. Central banks may increasingly need to adapt their economic models and monitoring tools to account for technological developments that are transforming production, employment, investment and financial markets.

The report highlights the growing importance of AI for the global economy while underscoring the uncertainty surrounding its long-term consequences. For central banks, understanding whether AI is generating temporary economic momentum or creating lasting productivity gains will be crucial to making effective monetary policy decisions in the years ahead.