BOJ’s deputy chief flags AI’s possible impact on neutral rate

What happened: Bank of Japan Deputy Gov. Shinichi Uchida said AI is driving a surge in demand that fuels inflationary pressure and long-term interest rates, and may affect the neutral rate of interest. Key numbers: The BOJ raised its policy rate to 1.25% at its September meeting and is widely expected to hike again before the end of the year. Why it matters: Uchida's comments suggest neutral rates for central banks worldwide might initially be forced higher by the spread of AI, while the longer-term impact remains unclear. He said the overall effect on R-star is still hard to gauge.

Bank of Japan Deputy Gov. Shinichi Uchida said AI is driving a surge in demand that fuels inflationary pressure and long-term interest rates, and may affect the neutral rate of interest.

Uchida's comments suggest neutral rates for central banks worldwide might initially be forced higher by the spread of AI, while the longer-term impact remains unclear. He said the overall effect on R-star is still hard to gauge.