Lagarde says AI could ease inflation pressures while ECB hikes rates to curb energy shock
ECB President Christine Lagarde highlighted AI's potential to lower long-term inflation by boosting productivity, even as the bank raised rates to contain an energy-price shock.
During a hearing before the European Parliament's Economic and Monetary Affairs Committee, ECB President Christine Lagarde said artificial intelligence could contribute to lower inflation in the long run by increasing productivity and cutting production costs. She explained that, all else being equal, higher productivity should ease price pressures. Inflation in the euro area has hovered close to the ECB's 2% stability goal but has recently accelerated because of rising energy costs.
To guard against the energy shock feeding into broader inflation, the ECB raised its three key interest rates by 25 basis points this month. Lagarde emphasized that there is no sign yet of the energy shock driving significant wage growth. She also cautioned that AI's overall economic effects are still uncertain and will hinge on the extent of its adoption, noting that 38% of firms used AI moderately by the end of 2025, while only 7% reported significant use, and over half of workers already employ AI in their tasks.
