AI's Impact on Inflation: ECB's Panetta Warns of Uneven Gains
European Central Bank Governing Council member Fabio Panetta emphasized the importance of understanding how artificial intelligence (AI) benefits are distributed, as this will shape aggregate demand and inflation. Speaking at an event hosted by the National Bank of Ukraine, Panetta noted that AI is set to transform various sectors, including productivity and growth, labour and financial markets, and payment systems.
According to Panetta, if AI mainly creates new tasks and raises expected labour income, demand could increase before AI's full productivity benefits materialize, prolonging inflationary pressures. He added that central banks need to comprehend the implications of these changes to maintain credibility.
Panetta also mentioned that automation may lead to weaker consumption, causing disinflationary effects from AI to emerge sooner. The ECB Governing Council member stressed that central banks cannot remain on the sidelines and must understand the ongoing transformations to preserve their credibility.