The head of Northern Trust shares a bold forecast on the impact of artificial intelligence on the U.S. economy, predicting a "massive disinflationary" effect and urging the Fed to exercise caution.
The head of the asset management division at Northern Trust, which manages $1.4 trillion, stated that the rapid development of artificial intelligence could have a "massive disinflationary" impact. He strongly urged the U.S. Federal Reserve to refrain from any changes to its policy until the effects of AI are thoroughly studied.
In his interview with the Financial Times, he emphasized that if even a portion of these expectations materializes across the entire economy, it would result in one of the largest positive supply shocks in history. This means a sharp increase in the volume of goods and services, which will inevitably lead to lower prices.
"If even a portion of these expectations materializes across the entire economy, it could become one of the largest positive supply shocks in history," the chief stated. He firmly added, "This cannot be ignored."
"Artificial intelligence could have a powerful disinflationary effect," he confirmed. In his view, this phenomenon could help the Fed achieve its coveted inflation target of 2% after years of persistent price increases.
This year, the Fed has kept rates unchanged, although there have already been three cuts of a quarter percentage point in 2025, the Financial Times notes. At a recent March meeting, regulator members actively debated the best way to respond to inflationary pressures, intensified by the conflict with Iran, amid an economy influenced by many opposing factors.
