Vice Chair Philip N. Jefferson delivered remarks at the 2025 Federal Reserve Bank of Cleveland financial stability conference, framing Artificial Intelligence as a major catalyst for economic change. He summarized recent indicators of widespread adoption, citing a St. Louis Fed report that found almost 55 percent of working-age adults used generative Artificial Intelligence in August. Jefferson described how firms are moving beyond experimentation to operational use and noted particularly high adoption within the financial industry.
Jefferson considered Artificial Intelligence through the Federal Reserve’s dual mandate of maximum employment and price stability. He observed that Artificial Intelligence can boost productivity by enabling workers to complete tasks faster and by improving resource allocation, potentially raising growth and easing inflationary pressure. At the same time, he acknowledged legitimate concerns about job displacement, especially for younger and less-experienced workers, and noted that some large employers have already trimmed hiring plans. The net effect on employment and prices remains uncertain, and Jefferson urged humility and continued study in assessing structural versus cyclical changes relevant to monetary policy.
Turning to financial stability, Jefferson reported that the financial system remains sound and resilient, but he flagged emerging vulnerabilities captured in the recent Financial Stability Report. In a Fed survey of market contacts, 30 percent cited a turn in sentiment toward Artificial Intelligence as a salient risk to the U.S. financial system, up from 9 percent in spring. He compared the current period to the late 1990s dot-com era and highlighted key differences: firms tied to Artificial Intelligence today generally have established earnings, price-to-earnings ratios remain below dot-com peaks, and far fewer publicly listed firms are explicitly AI focused. Nevertheless, he noted that debt financing for infrastructure has increased and could raise leverage in the sector, which he will monitor closely.
In conclusion, Jefferson emphasized uncertainty about the ultimate economic and financial effects of Artificial Intelligence and called for ongoing research, market outreach, and monitoring to ensure the technology’s transition occurs within a stable financial system that supports the dual-mandate objectives.
