Artificial Intelligence Boom Affects Key Rates

The boom in artificial intelligence (AI) has ambivalent implications for key bets. Deputy Governor of the Bank of Japan Shinichi Uchida warned about this, his words are quoted by Bloomberg.

According to the regulator's representative, AI is causing a sharp increase in demand, which increases inflationary pressure and raises long-term interest rates. It can also affect supply by increasing productivity and increasing fixed capital formation.

According to Uchida, the AI ​​boom could impact the r-star, an interest rate that neither stimulates nor constrains the economy. The rise of artificial intelligence could lead to higher neutral interest rates for central banks around the world, although the long-term consequences are unclear.

The top manager also noted that while growing demand for artificial intelligence has led to rising stock prices, which has eased financial conditions, large-scale bond issuance by technology companies has led to higher long-term interest rates, which has tightened conditions in the industry.

“AI can quickly render some forms of human capital obsolete, especially the skills needed for knowledge work. This could also impact social inequality, as people with better technological skills and flexible thinking could benefit far more than others,” he warned.