Artificial Intelligence. The New Engine of Global Monetary Policy

After years of treating this technology as a "long-term" force, this distinction has now collapsed into an integral part of the global economy's monetary policy tools and structural analysis.

The European Bank has decided its matter

The  European Central Bank (ECB) made its decision early, and according to European media, a recent report by the bank's experts revealed that "machine learning" has become an integral part of the analytical toolkit since the end of 2022.

The model, which relies on 60 indicators that monitor inflation expectations and economic activity, proved worthwhile in 2025 when it accurately monitored the upside risks of core inflation that exceeded official expectations by about 20 basis points.

The Bundesbank's president, Joachim Nagel, confirmed that the Bundesbank is already using the MILA model to evaluate central bank communications, stressing that the technology is there to serve central banks' primary mission of maintaining price stability.

Federal Reserve Productivity Struggle

In the corridors of the US Federal Reserve, the debate has shifted from "technical curiosity" to the heart of substantive trade-offs. While Christopher Waller is betting that AI could boost productivity to drive real incomes without inflationary pressures, Philip Jefferson is more cautious: The "appetite" of this technology for data centers and energy could push input prices upward, creating inflationary pressures parallel to productivity gains.

All eyes are on Kevin Warsh, the Fed's presidential candidate, who has described artificial intelligence as a force approaching "escape speed," warning that traditional economic models may need a thorough rethink to keep pace with this violent wave of innovation.

Wall Street. Split between "optimists" and "hawks"

On the other hand, New York's financial street is divided into two camps: the optimists (supply camp): they see AI as a "positive shock" capable of playing the deflationary role that tight monetary policy has been unable to do, paving the way for lower interest rates.

Hawks (investment spending camp): They warn of a record investment cycle (Capex) that will raise electricity prices and drain capital. Goldman Sachs reports predicted that demand for data centers will add 0.2 percentage points to inflation in 2026 as a result of rising energy costs.

Critical Question: Timing, Not Destination

Today's economic circles agree that AI is a "huge" phenomenon that forces central banks to revise their axioms.

Still, the "sequence of events" remains the biggest mystery: if productivity gains precede the investment boom, central banks will have margins to cut interest rates, and if the "explosion" of energy and capital demand comes first, policymakers may find themselves forced to tighten monetary policy at a time when the world is waiting for easing.