The Bank for International Settlements has cautioned that the surge in artificial intelligence spending could make it harder for central banks to judge when and how to adjust interest rates.
The Bank for International Settlements, often called the central bank for central banks, has raised a fresh concern about the global AI spending wave: it may cloud the economic signals that policymakers rely on to set interest rates.
At the heart of the warning is the size and speed of AI-related investment. When businesses pour large sums into new technology — data centers, chips, software, and the infrastructure to run it all — that spending can lift economic activity and push up prices in ways that are difficult to separate from broader inflation trends. For central banks, which watch prices closely to decide whether to raise, hold, or cut rates, that makes the picture murkier.
The concern echoes earlier debates about technology investment cycles. Big waves of capital spending, like those seen during the internet buildout of the late 1990s, tend to boost growth in the short run but can also generate imbalances. Central banks must decide whether the resulting price pressures are temporary or persistent — a distinction that drives very different policy responses.
AI spending adds a further complication: its productivity effects, if they arrive, could eventually reduce inflation by making businesses more efficient. That creates a two-sided puzzle. Rate-setters risk tightening too aggressively if they treat AI-driven price rises as ordinary inflation, but they also risk falling behind if they assume productivity gains will solve the problem on their own.
The BIS has long served as a forum where major central banks share research and thinking. Its warnings tend to carry weight, even when they do not translate directly into policy shifts. This latest note suggests global monetary authorities are beginning to grapple seriously with how AI fits into their economic models — models built long before large-scale AI investment became a meaningful driver of spending.
How central banks choose to account for AI investment in their forecasts could shape interest rate decisions for years ahead.
