By Sam Goldfarb
Treasury yields have pared overnight gains after Fed Chairman Kevin Warsh suggested that business investment in artificial intelligence could expand the productive capacity of the economy, which in turn could have "huge implications for monetary policy."
In recent trading, the yield on the 2-year Treasury note, which is particularly sensitive to shifts in interest-rate expectations, was 4.150%, according to Tradeweb, up from 4.138% Tuesday but down from 4.195% before Warsh's comments.
Speaking at a central bank symposium in Portugal, Warsh dodged questions about whether the Fed could raise rates at its next meeting. But his comments on AI still provided some hints about his thinking to investors hungry for any clues they can get.
Before becoming Fed chairman, Warsh strongly suggested that it would be a mistake to raise rates during an AI-led productivity boom because that boom would allow the supply of goods and services to catch up with demand-keeping inflation in check even with a stronger economy.
At his first post-meeting press conference last month, Warsh also reiterated that "strong productivity-led growth is not something we fear, but something we embrace."
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