Fed's Mary Daly says AI shows promise but warns it's too early to call it transformative

Daly Says Fed Officials Should Watch for Signs of AI Impact

Federal Reserve Bank of San Francisco President Mary Daly said that while there isn't much indication yet that artificial intelligence is fundamentally changing the US economy, policymakers must be open to signs that the new technology will have an impact. "It is easy to see the possibilities but harder to know when and how they will evolve," Daly said Tuesday in prepared remarks for an event hosted by the Silicon Valley Leadership Group in San Jose, California. Pointing to former Fed Chair Alan Greenspan's prescient observations in the 1990s that computers and the Internet would meaningfully transform work and business, spurring growth without igniting inflation, Daly said AI could follow a similar path, but added that it will take time to see its full impact in aggregate data. "Seeing developments before they fully emerge requires digging deeper, relying on disaggregated information that foreshadows transformation," Daly said. Fed officials are trying to assess how much of an impact AI will have on the economy and on productivity growth, the key elixir for expansion without higher inflation. Kevin Warsh, whom President Donald Trump has said he'll nominate to be the next Fed chair, has argued that AI is transforming the economy and that the central bank needs to acknowledge it. He and others have said an AI-fueled productivity boom should lead policymakers to lower interest rates. The Fed kept interest rates unchanged last month after cutting them three consecutive times in the closing months of 2025 in an attempt to buoy the labor market. Daly has said she supportedBloomberg Terminal the decision to hold rates last month, but that she sees one or two more reductions this year. A Feb. 11 report from the Bureau of Labor Statistics showed hiring picked up in January, rising by the most in more than a year.

San Francisco Fed president Daly: 'AI applications are 'good progress, but not transformative' (SP500:)

Mary C. Daly, president and CEO of the Federal Reserve Bank of San Francisco, said artificial intelligence-driven productivity gains could allow the U.S. economy to grow without triggering inflation, though she cautioned that it remains too early to declare the technology transformative. Mary Daly suggests AI could enable higher growth without triggering inflation, but it's too early to confirm AI's transformative impact. Daly cautions that while productivity is up, it's unclear if AI is the main driver or if these gains will be sustained over time. Daly states that historically, technology reshapes rather than reduces net employment, and AI is currently augmenting jobs rather than eliminating them.