OTTAWA, Sept 20 (Reuters) – Bank of Canada Governor Tiff Macklem said on Friday that the adoption of artificial intelligence (AI) by companies could add to price pressures in the short term by boosting demand, although the full effects will not be seen in the near term.
Macklem said strong investment in AI technologies is already boosting the economy, noting that demand for electricity is increasing as new data centers are built.
“In the short term, AI could boost demand more than it increases supply, through faster productivity growth,” Macklem said in Toronto at an AI conference.
“If that happens, the introduction of AI could lead to additional inflationary pressures in the short term,” he said.
As AI becomes increasingly popular, central bankers, whose primary job is to keep inflation stable and low, are considering how they can use the technology to better predict changes in consumer prices and employment.
Macklem says central bankers need to better understand how AI impacts workers, consumers, the economy and inflation.
Combined with a world more vulnerable to shocks, the effects of AI suggest inflation could be more unpredictable than in the 25 years before the pandemic, he said.
The Bank for International Settlements (BIS), which works with central banks around the world, said in June that central banks should embrace the benefits of AI but not let it replace humans in setting interest rates.
Macklem said there is no evidence that AI is replacing labor at a rate that would lead to a decline in total employment, but he cautioned that the far-reaching consequences are difficult to predict.
According to Macklem, the BoC already uses AI to forecast inflation, track economic sentiment, verify data and improve efficiency, but its implementation is still in the early stages.
“When you go into a dark room, you don’t go in right away. You feel your way around carefully,” Macklem said of how the BoC was looking for better information about how technology was making its way into the economy.
Canada last year launched a voluntary Code of Conduct for the Responsible Development and Management of Advanced Generative AI Systems. The code highlights measures that companies should implement when developing and managing generative artificial intelligence systems.
The Bank of Canada, Governor Tiff Macklem said Friday.
(Reporting by Reuters Ottawa bureau)
Keywords: CANADA CENBANK/
(By Promit Mukherjee and David Ljunggren)
