AI is revolutionizing the US economy, and the Federal Reserve is opposing the trend

AI is dramatically altering the American economy, impacting different industries and modes of operating. The Federal Reserve, on the other hand, is opposed this pattern. They worry about the jobs and financial stability that artificial intelligence may have on them.

The Fed wants to make sure that the economy stays stable and secure for all even as technology evolves. This opposition shows a tension between accepting cutting-edge technology and effectively controlling its hazards. 

As the US economy opens, rising artificial intelligence investment and trade problems create greater uncertainty. Often confessing it's more of a guess, Federal Reserve officials are battling to forecast the future. Cleveland Federal Reserve President Beth Hammack emphasized a "dual economy" in which rich people and stock market investors are succeeding while many others struggle with growing cost of living. She pointed out that this disparity complicates monetary policy management. 

High inflation and few employment possibilities exist
The labor market is flashing warning signals with increasing layoffs in spite of constant and high inflation, somewhat as a result of businesses' greater dependence on artificial intelligence (AI) technology. Strangely, while the model of the Atlanta Federal Reserve shows the economy is growing at an annual rate of roughly 4%, job growth has virtually come to a standstill.
While the real impact of artificial intelligence on the labor market is still uncertain, predictions point to a possible hiring freeze next year. This lowers prices at a time when companies are making hundreds of billions on artificial intelligence investments, thereby boosting GDP and growing energy need.
Concealed investments and false figures
Estimates show that corporate investment in artificial intelligence accounted for more than two-thirds of the 1.6% rise in the US GDP over the first half of the year. Still, uncertainty results from changes in commerce, tariff evasion, and the impact of greater stock values on wealthy consumption.
Investment in software and IT hardware grew at an annual rate of 26% in the first half of the year, according to a study by the Institute of International Finance (IIF), while other sectors hardly budged. The problem, though, is that these figures underestimate major costs in data centers and power infrastructure as well as the real value of intellectual property and software.
The IIF warned that official figures exaggerate the near-term GDP contributions of AI and underestimate its greater structural impact, hence endangering Federal Reserve policies of misjudging inflation and productivity pressures.
Will the dot-com bubble model return?
The most important question is how widespread artificial intelligence will be in the economy. If the investment stays concentrated on big technology companies, returns could peak quickly, therefore making growth vulnerable to a slowdown after the current investment cycle ends. Hamak said the situation reminded the dot-com boom 25 years before when technology caused a structural change that skewed financial policy off balance.
Investors' only option seems to be to gamble on artificial intelligence's future; yet, the possibility of a recurrence of the dot-com bubble of 2000 still worries them greatly. The reality is that years may pass before the full economic impact becomes clear.