AI gains’ distribution will shape inflation, ECB’s Panetta says

MILAN, Sept 21 - Central banks must grasp who stands to gain from artificial intelligence-driven advancements, as the distribution of these gains will influence overall demand and inflation, stated European Central Bank member Fabio Panetta on Monday. AI is poised to revolutionize productivity, growth, labor markets, financial systems, and payment mechanisms, Panetta explained.

If AI primarily generates new tasks and elevates anticipated income, demand might surge before the full productivity benefits of AI manifest, thereby prolonging inflationary pressures, Panetta added. The Bank of Italy governor, who also serves as a governor at the National Bank of Ukraine, made these remarks at an event hosted by the latter institution.

Panetta emphasized that credibility is a vital asset for any central bank, but its establishment and preservation depend on the nature of the challenges it encounters. Central banks cannot afford to remain passive observers, Panetta asserted, stressing that comprehending the ongoing transformations is becoming increasingly crucial for central bank credibility.

According to Panetta, should automation dominate, diminished consumption could precipitate the onset of disinflationary effects from AI sooner.