The Fed's dual mandate is: maximum employment, stable prices (aiming for 2% long-term inflation), and moderate long-term interest rates. The fed does this primarily with the federal funds rate and QE/QT.
AI's goal is to significantly eliminate the need for labor. So, what if: when unemployment rises due to AI and the fed lowers rates to stimulate hiring...there is no hiring? Just corpatrion saying "THANKS" and taking the savings and doing stock buybacks. AI will probably remove the Fed's effect on unemployment. The Fed will be unable to fulfill its dual mandate.
I was thinking this when I was reading the Trump Fed nominee gush about how rates should come down as AI will lessen inflation. But thats only half of the fed's mandate. I see no one gushing or estimating what the Fed can even do about stimulating employment. And thats a MANDATE, the whole reason for the Fed's existence . I also dont see anyone from congress actively considering something on this. The government works for it citizens, its citizens are primarily labor, so its the government's responsibility to adapt to this.
I have actually seen politicians call to eliminate labor from the mandate, years ago. Since AI will be giving business almost all the money, they should pay all the taxes. No taxes unless one makes over 150K seems about right. But that is a remedy, beyond my original question.
Will the Fed be made incompetent due to AI?