Fed's No. 2 Challenges Warsh: If AI Lifts Neutral Rate, 3.625% Is Looser Than It Looks

Vice Chair Jefferson argued in a July 16 speech that AI may be raising the economy's neutral interest rate — the level that neither stimulates nor restrains growth. If so, the Fed's 3.625 percent benchmark may be less restrictive than it appears, directly challenging Chair Warsh's view that AI is disinflationary and warrants rate cuts. The disagreement has direct stakes for borrowers and savers.