Central banks struggling to understand ways automation, AI are transforming global economy: Bank of Canada governor

Bank of Canada Governor Stephen Poloz, seen here on Oct. 30, 2019, compared the dilemma central bankers’ face today from automation and machine learning to the dot-com bubble of the late 1990s and early 2000s.Automation and artificial intelligence are transforming the global economy in ways that central banks are still struggling to understand, Bank of Canada Governor Stephen Poloz said Thursday.

Still, it creates more uncertainty for the world’s central bankers, largely because current economic models struggle to accurately capture the signals of economic growth coming from brand-new technology-driven industries. That raises the risks that official statistics underestimate just how much the economic output is expanding.

The U.S. Federal Reserve has faced criticism for holding interest rates low for too long after the dot-com bubble burst, even as the U.S. economy was growing. That easy-money policy helped encourage speculation in the U.S. housing market, leading to the 2008 financial crisis. The Bank of Canada is alone among major central banks in holding its key overnight rate steady for the past year amid a global economic slowdown fuelled by concerns over the ongoing U.S.-China trade war. The Fed has cut interest rates three times this year. Canada decided against a pro-active rate cut last month to guard against slumping global growth, leaving Canada with the highest official interest rates among advanced economies.

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