Central banks weighing their next move against inflation will have to take account of any slackening in growth powered by artificial intelligence, International Monetary Fund (IMF) Managing Director Kristalina Georgieva said on Nov. 6.
Speaking at the IMF's headquarters in Washington, Georgieva said unease over the world's reliance on the AI investment boom, and overstretched valuations, was already moving markets. "Things are going up and down, and this is likely to continue," she said, warning that such swings would make the task of central banks harder at a time when the risks to price stability have been mounting.
A sharp sell-off in technology shares on Nov. 5 spread across markets, driven by fears that a Democratic win in the US midterm elections would bring tougher scrutiny of AI and delay the construction of data centres, pushing investors into the relative safety of government bonds.
Those political worries landed on an AI trade that was already unsteady over returns on the huge sums being spent on AI-related infrastructure. The slump triggered margin calls and unsettled retail investors and hedge funds alike.
According to Georgieva, the AI investment boom is supporting growth in some economies and has helped cushion an adverse shock to oil supply caused by the war in the Middle East, but at the same time it is feeding inflationary pressure and raising financial stability concerns.
In Oct., the IMF highlighted substantial growth and financial stability risks that could follow if the AI investment boom comes to an end, alongside other threats, including a protracted Middle East war.
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