newsfilter
← Latest News
Federal Reserve Speeches·

Cook, The Opportunities and Risks AI Presents for the Economy and Financial System

  • The speaker, a former Stanford student & postdoc, emphasizes the transformative role of the university in their research on innovation & economics.
  • PCE inflation rose 3.8% in the year ending April, driven by gasoline prices from the Iran conflict & a 3.3% rise in core inflation.
  • High investment in AI data centers, totaling over $1.5 trillion in announced plans, is contributing to price increases in chips, construction wages, & utilities.
  • The labor market remains stable with a 4.3% unemployment rate, though risks of AI-driven job displacement & increased churn are elevated.
  • GDP growth & labor productivity remain robust, with expectations that AI will further boost productivity & economic expansion.
  • The Federal Reserve is holding interest rates steady while noting that inflation risks remain tilted higher than labor market risks.
  • AI adoption in finance is improving efficiency in compliance, call centers, & legacy code management while enabling better credit access.
  • Financial stability risks from AI include correlated algorithmic trading, sector disruption, & increased leverage from debt-financed AI infrastructure.
  • Cyber risks are escalating as advanced AI models can detect & exploit software vulnerabilities, though AI may also enhance security defenses.
  • The Fed is using AI for financial stability analysis, including classifying text data, forecasting recessions via sentiment analysis, & identifying network risks.
  • Fed experiments with agentic AI show potential for systematic risk identification, provided systems include verification & human oversight.
  • The speaker concludes that responsible AI deployment requires strong governance, risk management, & a balance of experimentation with caution.