On 6 October 2026, the website of the Bank for International Settlements published a speech by Michael Barr, a member of the Board of Governors of the US Federal Reserve System, delivered on 29 September at the Detroit Economic Club.
Barr began with an overview of the situation in Detroit. Unemployment in the metro area is estimated at approximately 11 percent — significantly higher than the average for Michigan and the United States. At the same time, entrepreneurship is actively creating jobs: since the pandemic, about 6000 new firms have been registered annually, adding 30 thousand jobs per year.
The automotive industry remains key. Detroit accounts for 12 percent of jobs in assembly and auto component manufacturing in the United States. National car sales in August reached an annual pace of 16,8 million units. Investments in batteries and electric vehicles are creating high-tech jobs.
At the national level, the US economy is demonstrating steady growth. In the first half of 2026, real GDP grew at approximately 2 percent on an annualized basis, and Barr expects a slight acceleration in the second half of the year.
Inflation has remained above the target level of 2 percent for five and a half years. Progress was disrupted by high energy prices due to the conflict in the Middle East and by a surge in investment in artificial intelligence, which pushed up prices for chips and related equipment.
The labor market looks balanced. The unemployment rate stands at 4,1 percent, and job creation averages about 80 thousand per month — close to the equilibrium level.
Barr devoted a significant part of his speech to the impact of AI. In the short term, investment in AI supports growth while simultaneously putting pressure on prices. In the long term, he is optimistic about gains in productivity and living standards. In the medium term (two to five years), uncertainty remains: the J-curve effect, the return on investment, and the question of whether AI will become more of a substitute for or a complement to labor.
With regard to monetary policy, Barr noted that in early October the FOMC unanimously raised short-term interest rates. Inflation is too high, the risks to achieving the goal have increased, and the risks to the labor market have decreased. In the baseline scenario, further policy adjustments will likely be needed to return inflation to target in a timely manner.
So how will monetary policy take into account the structural changes associated with AI in the coming years?
