BIS says AI investment is reshaping inflation outlook and rate risks

The Bank for International Settlements said the AI boom is making it harder for central banks to judge economic conditions and calibrate interest rates because the technology is affecting both demand and supply at the same time. In a bulletin on AI's economic implications, the BIS said debt-financed spending on data centres, chips and digital infrastructure is already boosting activity, trade and equity markets, adding to near-term inflation pressures. Over time, AI could raise productivity and productive capacity, helping contain inflation, but the timing, scale and distribution of those gains remain uncertain. The BIS said this blurring of cyclical signals raises the risk of policy miscalibration, as strong growth tied to AI investment could resemble overheating even if it partly reflects higher long-term potential, while productivity gains could also mask underlying demand pressures. It added that AI's effects are likely to differ across countries and labour markets, with economies tied to semiconductors, computing infrastructure or AI-related services potentially seeing stronger growth than others, further complicating monetary policy across jurisdictions.