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3 weeks ago
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ARTICLE AD BOX
Summary
As AI snaps the last “Phillips Curve” link between jobs and price levels, the US Federal Reserve’s policy might need its targets reset. Since relaxing its inflation goal will hit the dollar, shifting its other aim may make sense. Either way, its policy would look more like India’s.
Will America’s monetary policy become more like India’s as AI begins to crunch jobs?
The US Fed, mandated to maximize employment and keep prices stable, has cut its policy rate by three-quarters of a percentage point since mid-September in response to job-market weakness in the US.
In the quarter ended that month, however, the American economy grew at a hearty annualized rate of 4.3%, half a point faster than the previous three months, even as inflation rose to 2.8% from 2.1%—both above the Fed’s 2% target.
Clearly, its jobs mandate has taken precedence over price stability.
Granted, rate calls are aimed at altering outcomes under future conditions; also, we can’t be sure if AI is resulting in jobless growth.
But what if wide AI adoption turns pushing up US employment into a truly Sisyphean task?
Will the Fed end up letting inflation run higher in an endless quest for payroll expansion?
As AI snaps the last “Phillips Curve” link between jobs and price levels, the Fed’s policy might need its targets reset.
Since relaxing its inflation goal will hurt the dollar, shifting its other aim from jobs to output growth would be better.
Either way, its policy would look more like ours.
English (US) ·