Warsh's AI Case for Rate Cuts Faces Critique as Inflation Stays Above 2%

2 articles · Updated · The New York Times · May 12

Kevin Warsh’s argument that AI-driven productivity gains justify lower interest rates is challenged on the grounds that inflation remains above the Federal Reserve’s 2% target.
AI may help businesses produce more with less and ease price pressures, but the critique says Warsh overlooks a parallel effect: stronger demand from higher investment and consumer spending that can lift inflation.
That omission weakens the case that the Fed could cut borrowing costs without reigniting price growth, even if AI ultimately raises output per hour across the economy.
The debate echoes the 1990s, when Alan Greenspan argued internet-era productivity gains let unemployment fall below 5% to 6% without automatically fueling inflation.

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