On Friday, November 21, at the “Financial Stability” conference in Cleveland, United States Federal Reserve Vice Chairman Philip N. Jefferson discussed the impact of artificial intelligence (AI) on the economy, employment, and financial stability, considering AI as a significant transformative force in the current economic and financial systems.
Jefferson emphasized that “AI technology has been developing at an unprecedented pace in recent years” and cautioned to approach the impact of AI on employment and inflation “with caution.” He believes that the application of AI may enhance productivity but also pose challenges for the labor market adjustment.
Regarding financial stability, Jefferson underscored that the U.S. financial system remains “sound and resilient.” However, a survey revealed that about 30% of respondents view the shift in AI market sentiment as a potential risk, which could “tighten financial conditions and more broadly suppress economic activity.”
Jefferson stated that the Federal Reserve will continue to monitor various scenarios. He believes that “ensuring that the AI revolution unfolds within a stable financial system is not only feasible but also a necessary condition for achieving maximum employment and price stability.”
Jefferson also compared the AI era with the late 1990s dot-com period, highlighting differences in background and risk structures between the two.
He noted that current AI-related companies often have stable earnings, lower debt leverage, and limited number of listed companies, with price-earnings ratios not reaching peaks. Therefore, he believes that “a comprehensive bubble burst like the one at that time is unlikely to be replayed.”
Jefferson further cautioned that the ultimate impact of AI on the macroeconomy and financial stability still requires time for observation. In the face of the structural changes brought about by AI, decision-makers and markets should exercise caution—further observation and research are needed regarding the long-term effects it may have on employment, inflation, monetary policy, and financial stability.
“The evolution of technology, financial systems, and the overall economy is an ongoing process, and the transition to a new world may not necessarily be smooth.”