Why AI makes central banking tougher

AI is complicating the traditional roles central bankers play in managing stable prices, robust job markets, and sound financial systems. A new paper from the Bank for International Settlements highlights how AI is altering economic indicators that central banks traditionally use to set policy, affecting both supply and demand and driving both structural and cyclical changes. This shift makes it harder for central banks to predict and respond to economic trends, adding a layer of uncertainty to their decision-making processes. The implications could be significant, as central banks must now navigate a more dynamic and unpredictable economic landscape.