IMF's Georgieva Says Central Banks Must Weigh Any Slowdown in AI-Driven Growth

"Should there be a slowdown in the AI-driven growth impulse, it would need to be factored in as central banks assess the necessary steps in the fight against stubborn inflation," Georgieva told an audience at IMF headquarters in Washington, according to Reuters.

The remarks set out the bind the AI boom creates for policymakers. Georgieva said the surge in AI investment was supporting growth in some countries and offsetting the oil supply shock caused by the war in the Middle East, but was also adding to inflation pressures and to concerns about financial stability. If AI spending cools, a source of growth would weaken while inflation may still be too high, which would complicate any decision on interest rates.

She said worries about economies' dependence on the AI investment boom, and about high valuations, were moving markets around the world. "Things are going up and down, and this is likely to continue," she said, adding that the volatility would make central banks' work harder.

Her comments followed a steep sell-off in technology shares on Thursday, driven by investor fears that the Democrats' victory in the US midterm elections would bring tighter regulation of AI and slow data centre construction. Doubts about the returns on heavy spending on AI infrastructure had already weighed on the trade. Democrats plan to introduce a wave of AI and data centre legislation when they take control of Congress in January, Reuters reported.

Georgieva did not repeat the downside scenario the IMF published in October, which warned that a sharp fall in AI investment could reduce global GDP by 1.1% by 2028, including a 1.8% drop in US output, though she acknowledged the recent market swings. The IMF had also flagged a prolonged Middle East war as a risk to its outlook.