AI Could Push Inflation Either Way, Says BOE's Bailey

• Agrees with Kevin Warsh on the limitations of unconditional forward guidance, emphasizing that monetary policy decisions are always conditional due to inherent uncertainty.
• Notes that second-round inflation effects in the UK are currently 'quite subdued' and the labor market is softening, allowing the BOE to 'watch the situation for the moment'.
• States that AI could be inflationary if demand shocks precede supply shocks, or disinflationary if supply shocks come first, stressing the need for faster productivity growth in the UK.
• Emphasizes that the Bank of England makes its own policy decisions based on its UK mandate, independent of the Federal Reserve's actions.

Bank of England Governor Andrew Bailey discussed the UK's inflation outlook at Jackson Hole, noting subdued second-round effects and a softening labor market, which allows the BOE to monitor the situation. He agreed with Kevin Warsh on the limitations of unconditional forward guidance and highlighted AI's potential to be either inflationary or disinflationary depending on the sequencing of demand and supply shocks.