Central Banks Face New Challenges Amid AI Surge

Central banks are facing a new monetary paradox due to the AI surge, which is increasing spending, investment, and asset prices, but may later reduce costs. The Bank for International Settlements warns that AI affects both supply and demand, complicating inflation readings and interest rate determinations. The demand driven by AI is already evident through the construction of data centers and the expansion of electrical networks, while productivity gains remain uncertain. The BIS estimates that investment in data centers and AI-related infrastructure has reached about 1% of GDP in the most exposed economies.