Macro Markets and Machines_The Economic and Market Transformation Driven by AI_GWM report - Flipbook - Page 37
Macro, Markets, and Machines
November 2025
As far as the IMF’s study is concerned, however, near-term demand inflationary impacts are relatively
modest. The IMF’s high-TFP simulations show a peak impact on inflation in years three to four of roughly
0.05–0.1 p.p. over baseline across the countries and regions in the study (Exhibit 30). These increases in inflation
may also be minor, as active monetary policy dampens excessive price pressures, with policymakers responding
to shocks based on an inflation-targeting goal in the model. The near-term inflationary lift also fades in the
second half of the simulation horizon, flipping into slightly disinflationary effects. Higher supply capacity (with
the technology build-out and capital accumulation) offsets the higher demand channel on inflation, resulting in a
disinflationary effect in the order of 0.0–0.05 p.p. from around year seven and into year 10.
Exhibit 30 – IMF Scenarios See Limited Impact on Inflation
0.12%
Marginally inflationary
0.08%
0.04%
0.00%
-0.04%
Marginally deflationary
-0.08%
y=0
1
2
3
4
5
E.U. and Switzerland
6
7
8
U.S.
9
10
China
Sources: IMF; Scotia Wealth Management.
As a counterpoint to the IMF’s muted inflation response, the BIS’s estimates, based on a much larger TFP boost,
deliver a clearer signal of the inflationary potential of AI (albeit a possibly exaggerated one). The BIS’s study of
the impacts of AI on output and inflation incorporates an AI adoption TFP increase of 1.5 p.p. per year over the
next 10 years, compared with the IMF’s high-TFP scenario’s cumulative gains of 2.4 p.p. spread across the next
decade. Nevertheless, the greater magnitude of the shock challenges the inherent rigidities of economic models
to trigger clearer responses in inflation and central bank policy.
Exhibit 31 – The BIS’s Large TFP Shock Creates Large GDP Ripples
GDP response
Investment response
Consumption response
50
50
50
40
40
40
30
30
30
20
20
20
10
10
10
0
0
-10
-10
0
Anticipated
Unanticipated
Average
-10
-20
y=0
5
10
-20
15
-20
y=0
5
10
15
y=0
5
10
15
Sources: BIS; Scotia Wealth Management.
Scotia Wealth Management
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