Can an A.I. Productivity Boom Clear a Path for More Rate Cuts? Trump’s Fed Pick Thinks So.

President Trump's nominee for Federal Reserve chair, Kevin M. Warsh, is suggesting that an artificial intelligence-driven productivity boom could pave the way for additional interest rate cuts in the United States during the third quarter of 2025, as recent data shows promising economic indicators despite slower-than-expected job growth. According to the latest data from the Bureau of Labor Statistics, labor productivity was up 1.9 percent in the third quarter from a year earlier, a respectable but hardly spectacular growth rate that Warsh believes could be significantly enhanced by AI advancements. That number will almost certainly be revised higher in subsequent updates to account for job growth that was slower in 2025 than initially reported, potentially creating a more favorable environment for monetary easing. Warsh's position represents a notable shift in Fed thinking, as productivity gains have traditionally been viewed as a positive economic indicator that could allow for lower borrowing costs without triggering inflation, though he faces the challenging task of persuading more cautious colleagues on the Federal Open Market Committee to embrace this potentially accelerated timeline for rate reductions.