No. 1066 - Artificial intelligence, the natural rate of interest, and monetary policy

Questioni di Economia e Finanza (Occasional papers)
by Lucia Esposito, Andrea Fabiani, Elia Moracci, Andrea Papetti and Massimiliano Pisani
October 2026
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The paper evaluates the macroeconomic effects and monetary policy implications of the diffusion of artificial intelligence (AI) through simulations conducted with a model representing the euro area. The scenarios considered differ in the speed at which AI-induced productivity gains materialize. The analysis focuses on the effects on inflation, output growth and the natural rate of interest (r*).

If the productivity gains associated with AI adoption materialize in the short run, the supply of goods and services increases more than demand, leading to lower inflation. By contrast, if productivity gains only emerge gradually, inflation rises. By adjusting the policy rate in response to inflation or to the current level of r*, the central bank is able to stabilize inflation across all AI adoption scenarios.

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  1. 08 October 2026
    No. 1066 - Artificial intelligence, the natural rate of interest, and monetary policy
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