New Fed task force members share Chairman Kevin Warsh’s embrace of AI

A series of task forces designed to bring outside thinking to the Federal Reserve will include “the best minds,” Chairman Kevin Warsh said Thursday. For a task force that could be particularly important to the Fed’s economic management (AI), outside minds all seem to be leaning in the same direction.

Warsh’s AI task force members all seem to believe that AI will be a transformative technology with far-reaching impacts on growth and productivity. This aligns with Warsh’s own views. He personally selected the task force members.

The artificial intelligence task force was one of five the Fed launched on Thursday. Its official mission is to “evaluate the economic impact of new general-purpose technologies, including artificial intelligence, to inform the Federal Reserve’s policy decisions.” It will be led by three outside advisors: venture capitalist Marc Andreessen, economist Charles I. Jones and Xbox CEO Asha Sharma.

All have recently spoken or written in extremely positive terms about the effects of AI on the economy.

The Fed chairman has long been a proponent of the potentially transformative economic potential of artificial intelligence. Warsh said at his first news conference as president in June that its adoption was “perhaps as significant a change in the economy, in business, and in households as we’ve experienced in my entire adult life.”

He said he believes that in 2025, advances in artificial intelligence will be a reason for the Fed to lower interest rates because it will help the economy grow quickly without increasing inflation.

Warsh has been personal friends with Andreessen for decades. Warsh also ran venture capital investments for investor Stanley Druckenmiller after his tenure at the Fed ended in 2011. This expanded his Silicon Valley network and fortune.

Andreessen made a fortune creating some of the internet’s earliest web browsers and is now one of AI’s most vocal evangelists. “We turned sand into thought,” Andreessen told podcaster Joe Rogan in May, referring to silicon, the physical basis of AI chips.

Economist Jones shares much of Andreessen’s West Coast optimism. Jones recently went on leave from Stanford University to join the Anthropic Institute, part of leading AI firm Anthropic. Jones’ recent academic work has focused on the effects of artificial intelligence on economic growth, making him a key voice in Warsh’s efforts to bring the Fed to his perspective.

Jones A recent article noted that per capita growth in the US has consistently averaged 2% throughout most of US history. “However, if AI eventually automatically eliminates nearly all weak links in the economy, economic growth could accelerate significantly, potentially at rates exceeding 5 percent per year,” he wrote.

The paper analyzes what Jones identifies as weak links (aspects of the economy that would be difficult to automate) and also considers lower potential growth rates. But Jones writes clearly that AI “will likely be the most transformative technology of the modern age.”

Sharma, who became CEO in February Microsoft‘s Xbox gaming business has made strong statements supporting artificial intelligence. But as the leader of an operating business, he made the rare decision not to prioritize AI. Although Microsoft is incorporating AI into every aspect of its products, Sharma said in a recent interview with Bloomberg that it chooses not to put AI front and center on Xbox.

“Our console players are not excited about this experience,” said Sharma.

But that doesn’t make him a skeptic. “Do I believe in artificial intelligence now? Absolutely,” he said.

Three task force members did not immediately respond to a request for comment. The Fed declined to comment.

Where Warsh may face skeptics is at the Federal Open Market Committee, which has the power to set interest rates. FOMC members discussed the question of whether artificial intelligence could increase productivity at its June meeting, minutes from the discussion released this week show. The minutes stated that some FOMC participants embraced the idea that productivity would accelerate.

But they are not fully sold yet. “However, these respondents noted that significant uncertainty remains regarding both the timing and magnitude of potential productivity gains, which are expected to delay the continued increase in on-demand adoption of AI.”

Meanwhile, U.S. tech firms’ reckless adoption of artificial intelligence is starting to heat up the economy. New York Fed President John Williams said Thursday he is concerned about price increases in electricity and semiconductors due to the artificial intelligence boom.

Williams said prices have been rising like a “hockey stick,” with some components doubling and tripling in size. He said AI was a “demand shock” and added that it was unclear whether supply would grow along with it and that this would be necessary to keep inflation low.

The Fed will meet again at the end of July, where it is expected to keep interest rates steady. The task forces are expected to finish their work by the end of the year.