In a speech on “AI and the Economy”, Federal Reserve Board Vice Chair Philip N. Jefferson assessed the rapid uptake of artificial intelligence and how it could influence both sides of the Federal Reserve’s dual mandate, arguing that the net effects on employment, inflation and monetary policy are still highly uncertain. He also provided an updated view of U.S. economic conditions and the appropriate pace of policy adjustments. Jefferson pointed to accelerating adoption of generative AI, citing estimates that ChatGPT exceeded 800 million weekly users in October 2025 and research suggesting workplace use rose from 30.1% in December 2024 to 45.9% in June and July 2025, with around a third of adopters using AI tools daily. He highlighted evidence of material productivity gains, including a study finding a 14% average increase in issues resolved per hour for customer support agents using AI tools, with larger gains for novice and lower-skilled workers. On employment, he described job displacement risk from task automation alongside potential offsetting job creation from stronger productivity-driven growth and new job categories, with impacts likely to vary across industries and worker groups. On inflation, he argued AI-driven efficiency could lower costs and ease price pressures, but scaling AI could also raise costs in some categories via higher demand for scarce skills and inputs such as land and energy for data centers. For monetary policy, Jefferson said it remains too soon to draw firm conclusions, noting the challenge of distinguishing cyclical dynamics from structural change and the possibility that productivity gains could lift potential output and alter the employment-inflation relationship. Turning to the near-term outlook, he noted that the U.S. government shutdown has curtailed official statistics, while alternative data suggest moderate growth, a gradually cooling labor market and inflation running at a similar pace to a year earlier, with limited progress on headline inflation attributed to tariff effects and signs that underlying inflation may still be moving toward 2%. He supported the recent 25 basis point policy-rate cut as downside risks to employment have increased, described the stance as still somewhat restrictive but closer to neutral, and indicated a meeting-by-meeting, data-dependent approach, with uncertainty about how much official data will be available ahead of the December meeting.
Federal Reserve Board 2025-11-07
Federal Reserve Board Vice Chair Jefferson outlines how AI could affect jobs, inflation and the policy outlook and backs a 25 basis point rate cut
Federal Reserve Vice Chair Philip N. Jefferson discussed AI's uncertain impact on employment, inflation, and monetary policy, noting productivity gains and potential job displacement. He highlighted moderate U.S. economic growth and a cooling labor market, with inflation similar to last year. Jefferson supported a recent 25 basis point rate cut, emphasizing a data-dependent approach amid limited statistics due to the government shutdown.