TLDR: Federal Reserve Governor Michael S. Barr stated that artificial intelligence (AI) is poised to profoundly transform economies globally, though the specific outcomes will vary. Speaking at the Singapore Fintech Festival, Barr highlighted AI’s rapid adoption, particularly Generative AI, across large companies and its potential to cause short-term labor market dislocations while ultimately fostering long-term economic growth and higher wages. He also cautioned about significant risks, including algorithmic bias in lending and potential systemic risks in financial markets from AI-powered trading.
Federal Reserve Governor Michael S. Barr delivered a significant address at the Singapore Fintech Festival on November 11, 2025, outlining his perspective on the transformative power of artificial intelligence (AI) on global economies. Barr emphasized that while AI represents a ‘big deal’ with the potential to reshape economic landscapes, the ultimate outcomes are likely to be diverse and varied.
Barr noted that AI, particularly Generative AI (GenAI) since the launch of ChatGPT in late 2022, has entered a new era of widespread adoption. As of 2024, approximately three out of four large companies were reportedly utilizing GenAI, although some have yet to observe improvements in their bottom lines. Smaller companies, however, have shown slower adoption rates.
The financial sector is at the forefront of this technological shift, with one in ten job postings now mentioning AI, indicating a rapid evolution in required skills. Barr acknowledged that if these AI-driven changes occur gradually, both workers and firms will have adequate time to adapt. However, he warned that rapid implementation could lead to ‘significant dislocations in the short term’ within the labor market. He further suggested that AI adoption might be contributing to a ‘low-hire, low-fire job market environment’ in certain sectors and highlighted a ‘two-speed economy’ characterized by a substantial wealth and income gap between the top 40% and the rest of the population.
Despite potential short-term disruptions, Governor Barr expressed optimism about AI’s long-term benefits. He believes that, historically, technological introductions lead to the creation of new jobs and make existing roles more productive, ultimately resulting in higher real wages for workers and overall economic growth. This confidence is underscored by a ‘massive wave of data center investment,’ signaling leading AI companies’ belief in the imminent widespread use of AI across the economy.
However, Barr also underscored critical risks associated with AI. These include the potential for AI to reinforce biases in consumer lending and the dangers posed by AI in financial markets. He specifically cited concerns that profit maximization by AI-powered trading algorithms could inadvertently lead to tacit collusion, market manipulation, significant market volatility, or even systemic risk. To mitigate these threats, Barr stressed the necessity for innovation that is responsive to these risks, ensuring further responsible advancements in AI for core financial services functions.
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The Federal Reserve itself has a long-standing interest in AI, having explored its use in operations and considered its economic and financial system implications for decades. As far back as 1997, Governor Susan Phillips noted AI’s application in consumer loan underwriting, and in the past year alone, ‘AI’ has featured in the titles of no fewer than seven speeches by Fed Governors.
