Warsh says AI could turbocharge the economy. The Fed is keeping close watch.

Federal Reserve Chairman Kevin Warsh suggested Friday that artificial intelligence could turbocharge the economy and that the central bank is closely monitoring its impact.

"The potential for substantially higher growth is on the rise. Ever-expanding pools of capital are pouring into AI-related infrastructure of all sorts," Warsh said in a closely watched speech in Jackson Hole, Wyo.

Warsh stressed that the Fed recognizes AI is potentially a new factor of production that will have consequences for both the economy and interest rates.

He said the central bank is watching the development of large language models at the heart of AI and the tokens used to access the models "attentively."

He also posed some key questions: whether the application of AI will spur a significant, sustained rise in productivity across the economy and, if so, when. Over time, then, how much of that value will accrue to businesses and consumers, and what are the broad implications for workers and the strength of the job market?

The Fed is considering these questions with a task force Warsh appointed earlier this year focused on productivity and jobs.

Warsh's comments come after he said in 2025 that he believed AI would significantly increase productivity and, as a result, push down inflation.

Jennifer Schonberger is a veteran financial journalist covering markets, the economy, and investing. At Yahoo Finance, she covers the Federal Reserve, Congress, the White House, the Treasury, the SEC, the economy, cryptocurrencies, and the intersection of Washington policy with finance. Follow her on X @Jenniferisms and on Instagram .