Morgan Stanley (NYSE:MS) said Thursday that artificial intelligence (AI) could keep U.S. interest rates above post-2009 financial crisis levels if the technology boosts productivity without triggering widespread job losses.
AI Productivity Could Reshape Markets
In the bank’s podcast ‘Thoughts on the Market’, its Chief U.S. Economist Michael Gapen said AI’s impact on financial markets will ultimately depend on whether the technology is labor-augmenting or replaces them.
Gapen said if AI follows the path of the internet and the broader digital revolution by boosting productivity while keeping the economy near full employment, it would support faster output and productivity growth, benefit equity and credit markets, and “probably mean that we stay in an interest rate environment that’s certainly higher” than it was after the 2008 financial crisis.
“We think ultimately it’ll benefit markets greatly, similar to what we saw from the mid-90s to the early 2000s,” Gapen added.
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Morgan Stanley Expects Faster AI Adoption
Morgan Stanley’s baseline assumes AI spreads through the economy roughly twice as fast as the internet, though it would still take about a decade or more to fully reshape production, Gapen added.
The firm’s baseline also does not assume widespread labor market disruption, with Gapen saying AI is expected to diffuse gradually enough for the U.S. economy to rebalance workers without large-scale layoffs.
The Federal Reserve, in its June meeting, said that AI-related demand was contributing to inflationary pressures and any productivity gains from the technology would likely take time to materialize.
The International Monetary Fund similarly said AI was supporting the global economy, although its baseline forecasts do not yet assume productivity gains from the technology.
Japan Faces a Different AI Challenge
Robert Feldman, Senior Advisor at Morgan Stanley MUFG Securities, said Japan faces a different challenge, with AI viewed primarily as a way to ease persistent labor shortages rather than replace workers.
He said the country’s long-term success will depend on improving labor-market flexibility and expanding worker reskilling to capture productivity gains from AI.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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