00:00So we talk about the, you're right to say, we look out of the window, what we see is an
00:06economy that in some places is booming, it is being dragged upward, mostly by enthusiasm about AI, but then you
00:19go into other places and other factors, especially the impact of war, it's dragging economies down.
00:30One thing that is happening everywhere, whether your economy is going up or it's going down, is the stubborn inflation,
00:38price pressures that are coming from everywhere, and one of the sources, of course, is the energy shock in the
00:52Middle East and the energy shock from war,
00:55but one of the sources is this investment enthusiasm about AI.
01:01So my question is, from a monetary policy perspective, how should we think about the impact of AI in the
01:13short term, in the long term?
01:15Is there anything that we are paying too little attention and should be paying more attention today?
01:23Yeah. So it's a great question. A couple of things. First, Crystal, you pronounce it AI, in the U.S.
01:29we now pronounce it SI, just so you know.
01:34So it's probably...
01:36Can I say potato, potato?
01:38That's right. It was just a...
01:40I don't know how that's going to translate for the countries around the world with teams of folks.
01:46I'd say the advent of this new technology is probably the most consequential change to the U.S. and the
01:54global economy in my lifetime to this point.
01:56Yep. So I take it seriously, but as a central banker, also soberly, responsibly, I'd say it's going to do
02:05several things.
02:06First, it's obviously hitting the demand side of the economy before it's going to hit the supply side of the
02:12economy.
02:13So if you're a central banker and you're in the business of trying to ensure stable prices and full employment,
02:18you've got to recognize this is a shock.
02:20But it's a positive supply shock in the medium term.
02:24I do fundamentally believe that.
02:27But on the path to that positive supply shock, we're seeing increases in aggregate demand.
02:32That just is what it is.
02:34But I think of this shock differently than those other shocks you talked about,
02:37shocks of war and military conflict and the rest.
02:40This one, there really is, I think, a huge benefit to the global economy, to the U.S. economy over
02:48the horizon.
02:49So that's one comment.
02:50Second, it's a big deal for central banks because we're in the business of trying to, in some ways, distill
02:58noisy data all over the world.
03:00We get some of that from official statistics in the U.S., from the Bureau of Labor Statistics, the Bureau
03:06of Economic Affairs.
03:07We torture data with old-fashioned models to try to find out what's underlying inflation trends.
03:14Not so long from now, it won't be torture.
03:18We will have access at the fingertips of central banks to all the information in the world.
03:23And we'll be able to use new analytical tools to distill that data.
03:29So when we get new information, we're going to have a lot more confidence in what it tells us as
03:35we're looking outside the window and saying,
03:37is that real or is that lagged and noisy data subject to mismeasurement?
03:42So I think it's going to fundamentally change the conduct of monetary policy as a second point.
03:48Third, it's going to change the real economy.
03:50We don't know in the next 12 or 18 months its effect on employment.
03:57But if you believe like I believe, which is it will make economies and countries that put it to good
04:04use more productive,
04:06that it's going to make it so that we will have more wealth, then that has to be a very
04:11good thing.
04:12But the path from where we are to there is likely to be a very bumpy one.
04:16Bumpy in our understanding of the technology, bumpy because we really don't know what the market structure is going to
04:22be of these new technologies.
04:24Who's going to get to make the money?
04:26What are the consequences for those that bet that they were going to make money, but the market structure doesn't
04:30allow it?
04:31So I want you to hear from me optimism, but optimism leavened by the seriousness of purpose to the day
04:40jobs that you and I have.
04:41And I think it's an exciting development and it's an innovation that I think a decade from now they'll look
04:48back on and they'll say this was hugely consequential.
04:52So our job as policymakers to take it with that same kind of focus.
04:56I'll just say one more thing.
04:57On big, hard questions that don't matter much to the current policy conjuncture, my view is we at the central
05:06bank need to invest in the next policy conjuncture.
05:08So among the external task forces that I initiated about four or five months ago is one on productivity and
05:15jobs.
05:17We're going to have our first field hearing of a task force on November 16th in the Bay Area where
05:23we're going to wrestle with these with these issues.
05:26I'm pretty sure I've got the right questions, not sure I have the right answers.
05:30And so we've got a group of outside experts, both on the task force and people in the broader community
05:36to help us engage on that.
05:38And hopefully there'll be fruits of that, not just for us in the U.S., but these efforts that we're
05:44doing and investigating at the Fed, these are global public goods.
05:49And might the IMF, might other G20 central banks learn, decide to adopt some of these things their own?
05:56That's the hope and expectation.
05:58The better they do, the better we do.
06:00Very much look forward to that.
06:03So to avoid the linguistic controversy, let's call it the NHI, the non-human intellect.
06:15So if we look at that development that is incredibly rapid,
06:26we do have to think about the impact on inflation, short and long term.
06:32We do have to think about the impact on financial stability.
06:37And as you said, there is the excitement of what it may mean for productivity.
06:43On this triangle of inflation, possibly disinflation in the future,
06:50the impact on financial stability risk and the upside on productivity,
06:56which one you get your task forces to concentrate most on?
07:04What is, in your view, the one issue that dominates monetary policymakers?
07:10Yeah, so first, here's my working proposition about task forces.
07:16Because I've been on task forces like you have before we were in these jobs.
07:19You want to ask them the questions.
07:22And to be full disclosure, I check in with each of my five task forces periodically.
07:27But you also want to let them be themselves.
07:30The idea of the task force on productivity and jobs, on data collection, on inflation,
07:36is to let them produce new intellectual capital.
07:42And to drop that on the Federal Open Market Committee.
07:45To share their views with the broader audience and see whether that catalyzes new thinking.
07:51Otherwise, you and I and our peers in central banking, we could just push the same ideas around.
07:58The idea is to really let them do it.
08:01There are tail risks associated with all shocks.
08:04I'm not going to try to bite off one tail and say it's all to the good.
08:09What I'd say is the U.S. is investing through the private sector capital
08:15in a range of new technologies, in a range of new companies,
08:19with bets on different parts of the market structure.
08:23In my business, we don't have to figure out who's right or wrong.
08:27That's what financial markets are for doing.
08:30But we do want to step back and ask ourselves the question,
08:34if various scenarios were to happen, what are the implications for our remit?
08:39Our remit, as you know, we talk about as stable prices and full employment.
08:44But inching into that, again, you know, with the history of my visits to the IMF 20 years ago,
08:50we also want to think about financial stability risks.
08:54And the way I think about it might be a little bit different.
08:56I don't think the central bank or the international policymaking set
09:01that we should be in the business of stopping variants away from modal outcome.
09:09What we ought to want to ask ourselves, though, are there negative tailside risks that we can do something about?
09:16And we have to be pretty humble about that question.
09:18I've given the task force every ability to sort of ask themselves,
09:23what are the upsides, what are the downsides, and what are the implications for us?
09:28The same way I'm not going to prejudge FOMC meetings,
09:32I'm going to try not to prejudge where they come on.
09:34The task forces, yes.
09:35Very good.
09:36By the way, Kevin says we both have been on task forces.
09:41He was leading one that resulted in the Queen of England reporting the results to the parliament.
09:49So it's a very special chairmanship you offer.
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