By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Yannis Stournaras on Thursday said artificial intelligence could raise productivity and increase economies’ growth potential, but warned that the transition could also create inflationary pressures, labor-market disruptions and new risks to financial stability.
Speaking at the "Quo Vadis AI?" conference in Athens, Stournaras, who heads the Bank of Greece, said AI was already changing the environment in which economic and monetary policy operate and required central banks to adapt their analytical tools to a more complex economic landscape.
Stournaras said AI had the potential to increase productivity and allow economies to grow faster without generating corresponding inflationary pressures.
"If Artificial Intelligence leads to a significant increase in productivity, then the potential output of economies may increase," he said. “This means that economies will be able to grow faster without creating corresponding inflationary pressures.”
According to Stournaras, AI could eventually reduce production costs, boost real incomes and, in the medium term, take on “deflationary characteristics” through higher productivity and efficiency.
At the same time, he cautioned that the transition was unlikely to be smooth.
"In the short term, the integration of new technologies is often accompanied by high investment costs, restructuring of business models and changes in the labour market," he said. "These changes can cause temporary imbalances, both in prices and in employment."
The Greek central bank governor also highlighted research suggesting that the adoption of AI could temporarily create conditions resembling stagflation, with weak productivity, inflationary pressures and financial instability coexisting during the adjustment period.
Central banks would therefore need to adapt their policy frameworks while maintaining their traditional focus on price and financial stability, he said.
"The era of Artificial Intelligence does not change the core of central banks' mission, but makes it necessary to adapt analytical tools and policy frameworks to an economic environment of increased complexity and rapid change," he said.
Addressing financial stability, Stournaras said growing reliance on common AI models and data sources could increase systemic vulnerabilities during periods of market stress.
He also warned that concentration of data, computing power and digital infrastructure among a small number of large technology firms could create new forms of dependence and systemic exposure for the financial system.
More broadly, Stournaras argued that Europe needed to invest in digital infrastructure, skills and innovation if it was to benefit fully from AI-driven productivity gains while avoiding a widening of economic inequalities.