The Bank for International Settlements (BIS) has warned that the rapid expansion of artificial intelligence may make it more difficult for central banks to accurately assess inflation and determine appropriate monetary policies.

According to the institution, AI is transforming economies by increasing productivity while simultaneously driving significant investment in infrastructure and technology.

This dual impact creates uncertainty in measuring economic activity and predicting future inflation trends.
Central banks traditionally rely on economic indicators such as employment, consumer spending, and production costs when deciding whether to raise or lower interest rates.

However, the rapid adoption of AI may distort these indicators, making policy decisions more challenging. Economists say businesses are investing billions of dollars in AI-powered technologies, data centres, cloud computing, and automation.

While these investments could improve productivity over time, they also create short-term increases in spending that may influence inflation figures.
The BIS encouraged policymakers to continuously adapt their economic models to reflect technological changes, ensuring monetary policies remain effective in supporting economic stability.

Financial markets are expected to closely monitor how central banks incorporate AI-driven developments into future policy decisions.

Source: Reuters.