The rise of artificial intelligence is introducing a new era of uncertainty for central bankers, according to Emmanuel Moulin, a member of the European Central Bank’s (ECB) Governing Council. In a recent commentary, Moulin warned that AI’s impact on inflation is not only difficult to predict but is likely to exacerbate price volatility. The challenge lies in the fact that AI acts as a simultaneous catalyst for both supply and demand variables, creating a complex macroeconomic feedback loop.
In the immediate term, the massive surge in capital expenditure required to build AI infrastructure—from data centers to specialized hardware—is expected to exert upward pressure on prices. This investment phase creates a localized inflationary effect as firms compete for limited resources and energy. However, the narrative shifts in the long run, as the integration of AI into the broader economy promises significant productivity gains, which typically serve as a disinflationary force.
This dual-natured impact creates a significant headache for monetary policy. Moulin noted that the primary concern may not just be the absolute level of inflation, but the frequency and intensity of its fluctuations. If AI drives rapid shifts in labor markets and industrial efficiency, central banks may find traditional tools less effective at maintaining the steady-state price stability that has been the hallmark of the post-2008 era.
The ECB’s cautious stance mirrors recent sentiment from the Federal Reserve, which has also begun analyzing how AI supports growth while simultaneously pushing up costs. As global central banks navigate this transition, the focus is shifting away from whether AI is inflationary or disinflationary, toward how to manage an economy where technological shocks happen with increasing regularity and scale.