Mary C. Daly, President of the Federal Reserve Bank of San Francisco: AI Productivity Gains Are in Early Stages
Mary C. Daly, President of the Federal Reserve Bank of San Francisco, stated that we are currently in the early stages of artificial intelligence potentially leading to exponential productivity growth.
If the central bank acts too quickly, it may prematurely suppress economic potential; if it acts too slowly, it could adversely affect employment and living standards. She emphasized the need to closely monitor data to balance policy.
In market mechanisms, expectations of AI are driving continuous capital inflows into technology and productivity-related assets. Event-driven growth narratives attract long-term capital allocation, while policy uncertainty leads some defensive funds to temporarily avoid overvalued sectors. Beneficiaries are companies that genuinely adopt AI, while those relying on traditional models face pressure.
Source: Public Information
ABAB AI Insight
Mary C. Daly has previously discussed the productivity surge of the 1990s and monetary policy responses in public speeches. She has pointed out that the Fed needs to avoid tightening too early to support potential growth while being cautious of data lag risks, continuously assessing the structural impacts of AI on the labor market and inflation between 2024-2026.
On the capital path, the Fed mobilizes policy resources through a data-dependent framework, motivated to prevent policy missteps from amplifying economic fluctuations. Specific actions include publicly assessing the gap between AI adoption rates and productivity statistics, maintaining a neutral stance to adjust interest rate paths based on actual output, and supporting the continuous inflow of innovative capital without triggering overheating.
Similar to the hesitance in the Greenspan era regarding internet productivity, the Fed is in an early transitional phase from observation to framework adjustment, consistent with previous technological cycles where policy must wait for signal confirmation.
Essentially, this is a case of technological substitution: AI is gradually replacing traditional labor and process efficiency bottlenecks, concentrating capital in high-growth sectors through exponential productivity potential. The mechanism lies in matching data validation cycles with policy response functions, avoiding actions that are too rapid which could stifle the substitution process or too slow which could lead to uncontrolled inflation.
ABAB News · Cognitive Laws
In the early stages of the productivity revolution, acting too quickly is more likely to stifle long-term growth than acting too slowly. Data lag is not an excuse but a structure of uncertainty that decisions must navigate. The more intense the technological substitution, the more the central bank's balancing act tests historical judgment.