If AI fulfills its promises, the future economy could experience lower inflation alongside significantly reduced employment. This perspective comes from Chen Zhao, chief global strategist at Alpine Macroeconomics, who argues that the current "jobless profit boom" driven by AI expansion will soon result in an economy characterized by low inflation and low employment. “The chances are…that inflation will fall below 2% by the end of next year, ” Zhao stated. Falling prices would benefit American households—at least those able to maintain employment in an AI-driven labor market. How AI Might Reduce Prices Improvements in productivity could push inflation below the Federal Reserve’s 2% target, bringing it back to roughly pre-pandemic levels, before global supply chains were disrupted. This would represent a significant decline from the current roughly 3%, likely prompting the Fed to lower its key interest rate to stimulate demand. (Though too-low inflation is generally a positive issue, the Fed aims to maintain about 2% inflation to encourage consumer spending and support job growth. ) Other economists and technology leaders have expressed similar views recently. Sam Altman, CEO of OpenAI, told investors in March at a Morgan Stanley event that the disinflationary impact of AI is undervalued. Rick Rieder, senior managing director at BlackRock, described the technology as a force that reduces costs and increases output, leading to lower prices. “If technology has always aimed to do more with less, AI is a breakthrough in doing more with far less, ” he noted in a recent blog post. However, this price relief could come with a major drawback for workers displaced by AI.

Indeed, the slowdown in job growth is already underway, compounded by factors beyond AI, including trade policy uncertainty and a sharp decline in immigration, which have dampened employer hiring. Not everyone agrees that AI will reduce inflation, though. Various factors, such as tariffs, are driving prices higher. In the short term at least, AI-related developments are pushing some costs up rather than down. Bloomberg's analysis revealed that wholesale electricity prices nearly quadrupled near power-intensive AI data centers. Furthermore, several members of the Federal Reserve’s policy committee believe inflation risks remain elevated enough to justify maintaining current interest rates rather than lowering them. Some experts also worry that AI technology may fail to deliver the labor-saving efficiencies its advocates predict. If AI Saves Labor, Who Will Benefit?