Macklem Warns AI May Push Prices Higher Through Demand Boost
(Bloomberg) -- Bank of Canada Governor Tiff Macklem warned that artificial intelligence technologies may add to inflationary pressures as well as price and labor volatility in the short run.
In a Friday speech in Toronto, Macklem said strong investment in AI is boosting demand as rising equity prices and hiring add to consumption. Electricity demand is also “surging” because of the massive computing requirements of the technology. If those forces outweigh the expansion of productive capacity, the result may be faster price growth.
“AI could boost demand more than it adds to supply through faster productivity growth. And if that happens, AI adoption may add to inflationary pressures in the near term,” he said in prepared remarks.
Still, Macklem said the productivity gains of artificial intelligence adoption will increase supply and potential growth in the long run, allowing workers’ compensation and spending to rise with fewer price pressures.
“In the long run, we can expect AI to boost productivity. Higher productivity allows for higher wages and more spending without pushing up inflation,” he said.
