Kevin Warsh urges the Fed to rethink growth limits amid AI boom

During his address at the Jackson Hole symposium, Kevin Warsh urged the Federal Reserve to discard long-standing assumptions that cap the United States’ growth potential. He highlighted how artificial intelligence, massive semiconductor and energy investments, and expanding cloud infrastructure could boost productivity and expand the economy’s output without generating the same inflationary pressures historically associated with faster growth.

Warsh warned that if the Fed underestimates this new capacity, it may inadvertently stifle innovation, equipment purchases, and job creation. He also critiqued the central bank’s habit of forward guidance, saying it can trap markets and policymakers in a “hall-of-mirrors” dynamic. Nonetheless, he reaffirmed the Fed’s 2% inflation goal and stressed that price stability and stronger growth are not mutually exclusive. The speech frames the upcoming September rate decision as a test of whether the Fed can separate inflation from genuine productivity gains.