Warsh Brings the Fed's AI Reckoning to San Francisco

Federal Reserve Chairman Kevin Warsh takes his AI listening tour to San Francisco on Monday, chairing a three-hour public forum that will feature three panels of speakers bookended by his own remarks. It is the only scheduled public event tied to the five task forces Warsh created early in his tenure this year to examine issues of major importance to the Fed. An agenda published by the San Francisco Fed says the session will gather “input from a wide range of stakeholders on technology’s implications for the economy and the labor market.”

Warsh, who took the Fed's helm in May and attended nearby Stanford University, has called AI a “hinge point in history” and, echoing President Donald Trump's preferred phrasing, “super intelligence.” He named Marc Andreessen to chair the AI task force, and stocked its productivity and jobs panel with Chad Jones, a Stanford economics professor now working with the internal think tank of Anthropic — which is nearing an IPO that would value it above $1 trillion — and Asha Sharma, who runs Microsoft's Xbox business. Warsh was himself an AI investor before selling his holdings under Fed ethics rules.

The timing is awkward. For all of AI's disinflationary promise, the frenetic buildout is currently doing the opposite: driving prices higher in a way that increasingly worries Fed officials, with no clarity on when it lets up and the possibility the central bank may need to slow the very thing Warsh considers revolutionary. Last week's midterm elections also sparked a backlash against rapid data center construction, and Oakland Mayor Barbara Lee has joined a movement to ban local builds across the bay. “We have to make sure that AI is used responsibly and ethically,” Lee said. “It can't be a tool for harm, for discrimination, or for displacement.”

Warsh's early read on AI — a productivity free ride that could let the Fed keep rates lower than otherwise — has softened since May, given the uncertain timetable for those gains and the potentially inflationary investment required to get them. Fed Governor Lisa Cook, whose research focused on innovation, has repeated concerns that AI will bring “at least a temporary increase in the unemployment rate.” Governor Michael Barr said Thursday the U.S. should prepare for “serious short-term disruptions” to the job market depending on how fast AI deploys and whether it stays affordable for businesses of every size.

In the meantime, AI spending is holding up U.S. growth, stock gains and consumer and business spending that might otherwise be unremarkable. Richmond Fed President Tom Barkin recently called the outlay “railroad-plus-interstate-highways-historic” at a South Carolina chamber of commerce event, adding: “If that historic investment does not pay off and people scale back, you worry what is going to happen.” Barkin said he hopes Monday's discussion airs “the strongest possible evangelist's view, as well as the strongest possible other view,” because the task force's recommendations won't bind Fed policy — officials like him will decide that.