Federal Reserve chair nominee Kevin Warsh told lawmakers today that emerging technologies, including artificial intelligence (AI) and digital assets, are rapidly reshaping the U.S. economy and will require significant changes in how the central bank operates.
During his Senate confirmation hearing, Warsh, a former member of the Federal Reserve Board of Governors with close ties to Silicon Valley, fielded questions and concerns from lawmakers on the future of AI and its impact on the workforce.
Warsh said the Federal Reserve must update its models to account for AI’s accelerating impact on the economy, even as key effects remain uncertain. While he noted that the implications for employment and productivity are still unclear, he warned “we don’t have a long time to do new studies” to anticipate potentially significant shifts in productivity gains or labor market outcomes.
“This is the most disruptive moment in modern economic history in the U.S. and the world,” Warsh told the senators.
Warsh’s knowledge of AI played a key role in Tuesday’s hearing, with some Democrats and Republicans expressing skepticism over the actual productivity gains created by the technology.
Sen. Lisa Blunt Rochester, D-Del., pointed to older statements made by Warsh that implied his interest in lowering inflation rates due in part to a productivity surge driven by AI.
“What happens for policy if that surge doesn’t … materialize as expected?” Rochester asked Warsh.
Warsh acknowledged that while AI could become a major productivity boost and potentially ease inflation over time, the Federal Reserve lacks the data to count on that outcome.
“I think the essentials of new policy for the Federal Reserve is to get access to better data and to dig deeper into the productivity possibilities that can come out of this new investment wave,” Warsh said.
Rochester warned Warsh that “there’s been a lot of conversation here about concerns that in your record … you have been hawkish on inflation rates and keeping them low. And now we’re looking at AI. What I don’t want to see is us [using] AI as an excuse for making ‘good policy.’ Too much depends on it.”
In response to a question from Sen. Bernie Moreno, R-Ohio, about how an AI boom could impact entry-level white-collar jobs, Warsh agreed that AI is advancing rapidly but warned its effects on jobs are unclear and may lag.
“I am more confident that there will be improved output than I am certain about when the effects of that would be on the labor market,” Warsh said.
Both federal officials and industry experts have recently warned Congress and the Trump administration that workers’ protections will need to come sooner rather than later as AI innovation accelerates. However, there is some debate over what impact AI will have on the workforce.
One congressional report last fall estimated 100 million jobs are at risk of being replaced by AI, while Labor Department officials have said they estimate a lower level of impact with proper worker reskilling.
Despite any potential labor concerns tied to AI, Warsh said that the labor market will evolve over time, with new roles emerging even as technology reshapes what jobs are available.
Sen. John Kennedy, R-La., meanwhile, voiced his concern that “a lot of the stuff about artificial intelligence making us more productive is a bunch of hype by people who want to sell stock,” and added “I’d be careful there.”