The Milk Road Show The Fed Is Wrong About AI and the Economy w/ PDS
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Jul 29, 2025 Dive into the Fed's oversight of AI and its economic implications. Discover how Trump's policies are clouding perspectives on this tech shift. Explore how AI could drive deflation and impact the labor market. The conversation reveals the risks of not adjusting monetary policy swiftly enough. Real-world examples illustrate the evolving job landscape amid AI advancements. Understand the dual effects of immigration policies on productivity and job security, as well as the broader implications for economic growth.
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Fed Focuses on Tariffs Over AI
- The Fed is mainly focused on Trump administration policies like tariffs and immigration rather than AI's impact. - Only a couple of FOMC members are seriously considering AI's economic effects, indicating a lag in policy adjustment.
AI's Productivity Lowers Inflation Risks
- AI boosts labor productivity which lowers unit labor costs and inflation pressure. - Higher productivity lowers the natural unemployment rate, giving the Fed more policy space and tends to be disinflationary.
Fed Poised for Rate Cuts Over Time
- Fed leadership is eager to cut rates but is cautious due to tariff uncertainties. - Once they fully consider AI's disinflationary effects, policy is expected to lean dovish with rate cuts.