Members of the Federal Reserve are taking into account the impact of increased labor productivity due to the adoption of artificial intelligence technology. Fed Chair Jerome Powell expressed uncertainty about the outcomes, as economists and investors highlight the potential of generative AI tools to enhance worker productivity and transform the labor market.

Economists Ping Wang and Tsz-Nga Wong explored scenarios where AI technology could lead to significant improvements in labor productivity, with potential employment effects that could influence the Federal Reserve’s dual mandate. This could impact the Federal Open Market Committee’s interest rate decisions, as they forecast a federal funds rate settling near 3% in the longer run.

Investors are drawing parallels between the current push to build data centers and the network components boom of the 1990s. Concerns about valuation increases are prompting caution about future returns, according to Dan Tolomay, chief investment officer at Trust Company of the South. Explore more on how AI is shaping the Fed’s economic outlook in a CNBC video.

Read more at CNBC: AI’s machine learning may net productivity gains and influence Fed