TechFlow News, May 28: Federal Reserve official Musalem stated that policymakers cannot rely on a potential productivity boom driven by artificial intelligence to alleviate persistently high inflation. Musalem noted: “I believe it would be risky to count on improved prospects for future productivity growth to resolve our current inflation problem.” Renewed tensions with Iran have reignited upward pressure on prices and prompted more policymakers to warn that further interest-rate hikes may be necessary if inflation remains elevated.
Musalem warned that, after adjusting for inflation, the Fed’s benchmark interest rate currently sits below the so-called “neutral level”—the rate at which monetary policy neither restrains nor stimulates the economy. He also pointed out that the labor market remains stable, inflation is “significantly above” the Fed’s 2% target, and longer-term inflation expectations are trending “gradually upward.” (Jinshi)
