Artificial intelligence could drive inflation higher, Swiss National Bank official says

Swiss National Bank governing board member Petra Tschudin declared that artificial intelligence could drive inflation higher in the short term although the aggregate effect of the technology remains ambiguous, according to an interview published on Friday.

The central bank was closely monitoring the significant impact of AI on prices, adding that it could have a major effect in both directions.

Tschudin's statement reads: “Shortages can occur for example with chips, causing prices to rise. In the short or medium term, upward inflationary pressure can also rise.”

“In the longer-term artificial intelligence could also lower prices by increasing productivity ​and making goods cheaper,”

“But because inflation was calculated on an annual basis, to have a deflationary effect, this price decline would have to repeat itself regularly, she continued.”

According to Silvana Tenreyro, a warning has been published by Bank of England staff that even if artificial intelligence enhances economic output, it might not reduce rising prices.

The latest forecast showed that the SNB does not see inflation above or below its desired yearly price surge of 0% to 2% in the period up to the first quarter of 2029. She still believes that the central bank will not adjust its change in policy rates which stands at 0%.

However, the forecast was based on how the central bank saw inflation developing if borrowing costs were kept constant.

Tenreyro further stated: “The conditional inflation forecast should not be understood to mean that interest rates will remain at their current level for three years, so we do not publish the interest rates forecast.”