In published remarks, the Monetary Authority of Singapore called for a gradual, evidence-based monetary policy response to the artificial intelligence (AI) boom, distinguishing its immediate boost to demand from its uncertain longer-term productivity benefits. Monetary policy should remain appropriately restrictive while demand effects dominate and could become more accommodative as productivity gains demonstrably emerge. The remarks also advocated macroprudential safeguards against excessive leverage linked to optimistic expectations of future AI revenues. AI investment and production are supporting global demand and offsetting pressure from trade tensions and higher energy costs in several Asian economies. Electronics associated with AI account for more than 70% of Asia’s export growth in 2026. However, growth in sectors producing AI technologies largely reflects capital accumulation and more intensive use of equipment rather than broad gains in total factor productivity. Wider productivity benefits depend on adoption, complementary investment in skills and infrastructure, and organisational redesign. Under sufficiently broad adoption and appropriate investment, Organisation for Economic Co-operation and Development estimates suggest AI could raise annual total factor productivity growth by up to 0.6 percentage points. Central banks should not assume that strong activity already represents a lasting increase in productive capacity or a shift in the economic benchmarks guiding monetary policy, including Singapore’s neutral exchange rate path. The eventual effect on the neutral interest rate is uncertain, as stronger investment returns could push it higher while labour displacement and income uncertainty could increase precautionary saving. Overoptimistic valuations and rising leverage could also reverse sharply if expected gains disappoint. Alongside monetary and macroprudential policy, budget, regulatory and structural measures should support AI adoption, skills training and applications that augment workers’ capabilities, with regulatory safeguards to preserve trust.
Monetary Authority of Singapore urges cautious monetary policy response as AI demand outpaces verified productivity gains
In published remarks, the Monetary Authority of Singapore advocated gradual, evidence-based monetary policy calibration as AI investment boosts demand before broad productivity gains are established. Policy should remain appropriately restrictive while demand effects dominate and could become more accommodative as verified productivity improvements emerge. Macroprudential safeguards should address leverage based on optimistic revenue expectations, alongside measures supporting AI adoption, skills and regulatory safeguards.