Walsh pushes AI to reshape the Federal Reserve, but it still relies on traditional interest rate tools to fight inflation in the short term

Comparing news, Federal Reserve Chairman Kevin Walsh is promoting the use of artificial intelligence (AI) to reshape the central bank's economic analysis and policy decision-making system, but as inflationary pressure continues, the Fed still needs to rely on traditional interest rate tools to stabilize prices in the short term.

According to reports, Walsh hopes to reduce the Fed's reliance on lagging economic data and traditional surveys through AI, and use real-time data provided by retailers, banks and other institutions to capture changes in economic growth and inflation more quickly. He previously built AI models called Milton (Milton) and Tobin (Tobin) to analyze modern economic problems.

Since taking office, Walsh has promoted the expansion of AI applications within the Federal Reserve. Currently, dozens of employees have explored the role of AI in data analysis and economic forecasting through test environments. At the same time, he is also considering adjusting the operating mechanism of the Federal Reserve, including reducing the number of annual monetary policy meetings to improve decision-making efficiency.

However, the market is still divided over the Walsh reforms. After its press conference on July 29, the US stock market fluctuated, and some investors questioned its stance on curbing inflation. Analysts believe that although AI may enhance the Fed's ability to make long-term decisions, the central bank's policy framework will not fundamentally change in the short term due to technological transformation.

The market expects that the Federal Reserve under Walsh's leadership will continue to advance AI and institutional reforms, but until inflation returns to the 2% target, interest rate policy will still be the main regulatory tool.