• Federal Reserve Governor Beth Hammack states it's "too soon" to assess AI's full economic impact, highlighting uncertainty around jobs and inflation.
  • She maintains support for "modestly restrictive" policy amid sticky inflation, diverging from colleagues signaling potential rate cuts.
  • The Fed is actively analyzing AI's effects on financial stability and regulation as tech investment surges.

Federal Reserve Governor Beth Hammack struck a note of deliberate caution regarding artificial intelligence's economic impact this week, telling an audience of economists and bankers that it remains "too soon to say what will happen with A.I." Her comments come amid heated market speculation about AI's potential to boost productivity and reshape labor markets.

"We are watching the developments closely, but the full extent of AI's impact on the economy, labor markets, and inflation remains highly uncertain," Hammack said, according to people familiar with her private remarks to financial executives. She emphasized that while AI could prove transformational—both creating and destroying jobs—the Fed needs more concrete data before drawing policy conclusions.

Hammack's cautious tone extends to her monetary policy stance, where she continues to favor keeping interest rates at "modestly restrictive" levels. This position places her somewhat at odds with other Fed officials who have recently hinted at potential rate cuts later this year. With consumer prices still rising at a 3% annual rate—above the Fed's 2% target—Hammack warned that maintaining higher rates might be necessary as AI and other forces continue to introduce economic uncertainty.

Labor market concerns feature prominently in Hammack's assessment of AI risks. She noted that recent graduates and entry-level workers could face the most significant disruption as businesses reevaluate hiring needs and required skills in response to automation technologies. This comes as the U.S. jobs market shows signs of softening, with unemployment recently exceeding job openings for the first time in years.

The Federal Reserve has quietly intensified its internal analysis of AI's implications for both financial stability and its own supervisory capabilities. Officials recognize that legal and risk-management frameworks must evolve alongside technological advances, though specific regulatory proposals remain in early development stages.

Efforts to reach Hammack's office for additional comment were unsuccessful Thursday afternoon. A Fed spokesperson declined to elaborate beyond her published remarks from earlier in the week.

Hammack's position reflects the delicate balancing act facing central bankers as they navigate conflicting economic signals. While some market participants anticipate near-term rate relief, her continued hawkish lean suggests the Fed remains wary of declaring victory over inflation too soon, especially with AI's economic effects still largely unknown.

Correction: An earlier version of this article misstated the timing of Hammack's comments. They were delivered earlier this week, not Thursday.