The Fed's AI forum opens as the boom itself pushes prices up

Federal Reserve Chair Kevin Warsh convenes a public forum in San Francisco on Monday on AI's economic effects, the most public step yet in the central bank's effort to take stock of a boom that is currently pushing inflation up 1

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Warsh says he wants a better grasp of what he and his colleagues may have to weigh, from possible large-scale job losses to rapid growth and falling prices 1

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. Per the San Francisco Fed's published agenda, the event runs three panels of speakers with Warsh's comments at either end 1

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. Of the five task forces Warsh set up this year, it is the only one with a scheduled public event 1

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A task force drawn from the tech world

The AI task force is chaired by Marc Andreessen, a tech industry figure and Stanford contemporary of Warsh 1

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. Its other named members include Stanford economist Chad Jones and Microsoft Xbox chief Asha Sharma 1

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. Warsh, Fed chair since May, has called AI a "hinge point in history" and uses the term "super intelligence" 1

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. He was an investor in AI firms before taking the job and sold his holdings under Fed ethics rules 1

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. The Fed's attention to AI predates him; research accelerated after ChatGPT's release in 2022 1

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The boom is inflationary now

Warsh's own thinking has shifted, per the reports 1

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. He initially saw AI as disinflationary, with productivity gains eventually allowing lower interest rates. Since joining the Fed in May, he has taken a more cautious view, pointing to the uncertain timing of those gains and the inflationary cost of building the infrastructure 1

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. In August, Warsh called AI "a new variable" for monetary policy 2

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The dilemma for Warsh is straightforward: building data centers means competing for limited electricity, chips, materials and workers, which pushes prices up 2

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. For now, per the reports, AI investment is propping up growth, stock-market gains and spending 1

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. The promised productivity gains remain largely theoretical, per Decrypt 2

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Other Fed officials have voiced similar worries. Governor Lisa Cook warned in September that AI could cause at least a temporary increase in unemployment, and possibly a rise in underlying joblessness 1

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. She also said, per Decrypt, that AI investment is at least delaying the return to the Fed's 2% inflation target 2

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. Governor Michael Barr said Thursday the US should prepare for "serious short-term disruptions" in employment, depending on deployment speed and whether AI stays affordable to businesses of every size 1

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Richmond Fed President Tom Barkin frames the scale differently. "You have this investment that is truly historic. You are talking railroad-plus-interstate-highways-historic," he said, while flagging the danger if it fails to pay off and people scale back 1

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The squeeze is already reshaping other industries. Bitcoin fell below $69,000 on Friday as stronger-than-expected inflation figures fed concerns about another rate hike from Warsh's Fed 2

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. Both data centers and mining operations run on huge amounts of electricity, so AI companies hunting for power are squeezing the miners out 2

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. Hyperscale Data shut down Bitcoin mining at its Michigan facility in September to serve an AI customer in a deal that could be worth over $1.2 billion, per Decrypt 2

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The backlash next door

The forum lands days after midterm elections that sparked a backlash against fast data-center building and sharpened worries about deepening inequality 1

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. Oakland Mayor Barbara Lee has joined a movement to ban local data-center construction across the Bay from San Francisco, saying AI must be used responsibly and cannot become a tool of bias, harm, discrimination or displacement. "We have to make sure that AI is used responsibly and ethically... It can't become a tool that compounds the biases that are already built into our systems. It can't be a tool for harm, for discrimination, or for displacement," she said 1

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. The concerns reach past jobs and prices into land use, mental health, financial-market stress and national security 1

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None of it will settle policy quickly. The task force's recommendations are advisory, and the forum will not determine the Fed's December 9 interest-rate decision, though it could offer clues about policymakers' views 1

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. The whole event runs three hours, which may be short for a set of questions this sweeping 1

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. "I'm hopeful we'll hear the strongest possible evangelist's view, as well as the strongest possible other view. Then we'll have a chance to wrestle with it," Barkin said 1

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