Mary C. Daly, president and CEO of the Federal Reserve Bank of San Francisco, discussed how artificial intelligence may reshape the U.S. economy this week [1].
Her assessment is critical because AI-driven shifts in productivity and employment directly influence the Federal Reserve's decisions regarding interest rates and monetary policy.
Speaking at the Bloomberg Tech 2026 conference in San Francisco, Daly said AI has the potential to raise overall productivity [1]. She said such gains could support the labor market by creating new roles and increasing efficiency [1].
However, the timeline of these benefits remains a point of contention among economic observers. Some reports suggest that AI will provide a net boost to the labor market through job creation [1]. Other perspectives indicate that the economic costs of AI, such as job displacement, might arrive faster than the productivity benefits [1].
Daly said these factors are essential for the Federal Reserve to monitor as it shapes its policy stance. The tension between immediate disruption and long-term growth creates a complex environment for maintaining economic stability.
The San Francisco Fed chief said the interplay between technology and labor is a primary driver of current economic forecasting [1]. This includes evaluating whether the technology will strain the economy before delivering sustainable gains [1].
“AI could raise productivity and help the labor market”
The Federal Reserve is attempting to quantify the 'productivity paradox' of AI, where the technology may cause short-term labor volatility before achieving long-term growth. If costs and displacements outpace gains, the Fed may need to adjust monetary policy to counter unexpected economic strain, whereas rapid productivity growth could allow for higher interest rates without stifling the economy.
