Key facts
- Central banks must understand the distribution of AI-driven gains to manage inflation, said ECB's Fabio Panetta.
- AI's impact on labor income and productivity could either prolong inflation or cause disinflation, Panetta stated.
- Panetta spoke at an event hosted by the National Bank of Ukraine.
- Understanding changes is essential for central bank credibility, Panetta said.
Central banks need to understand how artificial intelligence-driven gains are distributed to help shape aggregate demand and inflation, European Central Bank Governing Council member Fabio Panetta said on Monday.
Panetta, who is also governor of the Bank of Italy, stated that AI is poised to transform productivity, growth, labor and financial markets, and payment systems. He explained that if AI primarily creates new tasks and increases expected labor income, demand could rise before AI's full productivity benefits are realized, potentially prolonging inflationary pressures. Conversely, if automation becomes dominant, weaker consumption could lead to AI's disinflationary effects emerging sooner.
Speaking at an event hosted by the National Bank of Ukraine, Panetta emphasized that central banks cannot afford to be passive observers. He stressed that understanding the ongoing changes is increasingly crucial for maintaining central bank credibility.