AI-Driven Monetary Policy Shifts Gain Framework in Central Banking

A new framework published in January 2025 examines how artificial intelligence can reshape monetary policy through two distinct channels. The indirect effects occur when AI influences economic conditions such as productivity, inequality, and other factors that impact the appropriate monetary-policy stance.

The direct effects concern how interest-rate decisions or balance-sheet changes move through financial markets and the wider economy to affect inflation, growth, and employment. Central banks may also see changes in their business processes due to AI's automation of tasks and employees adapting to new tools.

New methods involving complex systems research, neural networks, and large language models can expand analytical tools used for economic and financial analysis and forecasting. These changes could have broader implications for monetary policy, banking supervision, financial stability, and payment and settlement infrastructure.