AI making it difficult for central banks to determine growth potential: BIS

The rise of artificial intelligence adds layers of complexity to central banks’ ability to evaluate potential economic growth. AI is transforming demand, supply, and financial markets, leading to greater uncertainty. Measurement errors related to potential output and natural interest rates have expanded with AI’s influence. Furthermore, investment booms driven by AI create financial stability concerns, necessitating policy responsiveness and global collaboration among central banks to effectively address these challenges.