Fed Urged to Closely Examine AI’s Economic Effects Before Shifting Rates

Published: 18 Feb 2026

U.S. Federal Reserve policymakers need a clearer picture of how artificial intelligence is shaping productivity before adjusting interest rates, according to Mary Daly, president of the Federal Reserve Bank of San Francisco.

Speaking at an academic event in California on Tuesday, Daly said the rapid expansion of AI tools has fueled optimism that the U.S. economy could grow faster without triggering higher inflation. However, she cautioned that current data does not yet provide strong evidence that AI is delivering economy-wide productivity gains.

Some policymakers and economists argue that heavy investment in AI could mirror the productivity boom seen in the 1990s, when computers and software reshaped business operations while inflation remained relatively contained. The Trump administration has echoed that view, suggesting AI-driven efficiency gains are already emerging.

Daly, however, urged patience. She noted that most large-scale economic studies so far show only modest productivity effects from AI, adding that transformational technologies often take years to fully influence growth trends.

“It may simply be too early,” she said, explaining that while individual companies may see benefits, those gains do not immediately show up across the broader economy.

Her comments highlight a growing challenge for the Federal Reserve as it weighs future rate decisions. If AI ultimately allows the economy to expand more rapidly without stoking inflation, the Fed could have more flexibility to keep monetary policy steady. But misjudging that impact could risk either slowing growth unnecessarily or letting inflation reaccelerate.

Daly emphasized that careful analysis of incoming data will be critical as policymakers assess whether AI represents a true productivity shift – or simply a promising technology whose economic impact has yet to materialize fully.