Trump’s Fed pick says AI could push down interest rates soon. Disagreements are already brewing
Trump’s Fed pick says AI could push down interest rates soon. Disagreements are already brewing
Publish Date: 2026-02-17 14:31:00
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Kevin Warsh during The Semafor World Economy Summit in Washington, DC, on April 18, 2024. – Samuel Corum/Bloomberg/Getty Images
Advances in AI are unlikely to push down interest rates in the short term, a key Federal Reserve official said Tuesday — a stark contrast to Fed Chair nominee Kevin Warsh’s plan for slashing borrowing costs.
“I expect that the AI boom is unlikely to be a reason for lowering policy rates,” Fed Governor Michael Barr said in prepared remarks during an event in New York.
In December, Warsh, whom President Donald Trump named last month as his pick to lead the central bank after Fed Chair Jerome Powell’s term ends in May, suggested that business adoption of artificial intelligence would usher “in the most productivity-enhancing wave of our lifetimes.”
The central bank should take the same leap of faith that they did with the internet under Fed Chair Alan Greenspan and lean toward cheaper borrowing costs, he said.
Michael Barr, member of the Federal Reserve Board, participates in a board meeting at the Federal Reserve in Washington, DC, on October 24, 2025. – Aaron Schwartz/EPA/Shutterstock
Barr’s latest remarks show there’s already some disagreement brewing within the Fed’s powerful 12-person rate-setting committee on how AI could change the world’s biggest economy. That’s crucial because Fed officials each have only one vote per person, including the chair, when they meet eight times a year to set interest rates. That means Warsh would need to get his colleagues on board with lowering rates.
In his speech, Barr outlined various ways the technology could affect hiring, productivity and wages, saying he expects AI “will have a transformative effect on the economy” overall.
The most likely impact of AI on the economy is that “some occupations are displaced while new ones emerge, as AI is increasingly integrated into many existing roles,” Barr said.
“But AI adoption occurs gradually enough that large and widespread…
