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1. Warsh calls a public forum on AI and prices
Federal Reserve Chair Kevin Warsh will lead a public forum on Monday, November 16, in San Francisco to examine how artificial intelligence is affecting inflation, productivity and employment. The central question behind Warsh's AI inflation inquiry is whether the technology will push prices down, keep them elevated or displace American workers, and the answers could shape interest rates and the outlook for Bitcoin (BTC).
The event is a conference of the Productivity and Jobs Task Force, hosted by the Federal Reserve Bank of San Francisco. It will gather technology executives, economists and employers in one room, with the aim of giving policymakers a clearer picture of how quickly AI is changing the way companies produce goods and services, and what that means for the cost of living.
For investors in digital assets, the meeting is more than an academic exercise. Interest rates are one of the strongest forces acting on Bitcoin's price, because they influence whether money flows toward risky assets or toward safer, income-producing ones. Any shift in how the Fed reads the AI boom could eventually filter through to rate policy, and from there to crypto markets.
The Fed's main tool for managing inflation is its benchmark interest rate, which influences borrowing costs across the economy, from mortgages and business loans to the yields offered on government bonds. When the central bank believes prices are rising too quickly, it keeps that rate high to cool demand. When it sees inflation easing, it can lower the rate to support growth. The way the Fed judges AI's effect on prices therefore feeds straight into one of the most watched decisions in global finance.
2. Why does AI matter for inflation?
AI matters for inflation because it can work in two opposite directions at once. If the technology lets companies produce more at lower cost, it can ease price pressure. If the rush to build AI infrastructure absorbs scarce resources faster than the productivity gains arrive, it can push prices higher in the meantime.
Warsh has leaned toward the optimistic reading. He has argued that AI could allow businesses to raise output while cutting costs, which would bring inflation down without forcing the Fed to keep borrowing expensive for households and companies. In that view, the technology acts like a supply-side tailwind, expanding what the economy can produce without overheating it.
Not everyone at the central bank shares that confidence. Some of Warsh's colleagues see the opposite dynamic playing out right now: the investment wave tied to AI is already lifting prices, while the promised efficiency gains remain largely theoretical. They point to the physical demands of the buildout as the clearest evidence.
Data centers consume enormous amounts of electricity and require advanced chips, construction materials and skilled labor. Each of those inputs is in limited supply, and when many large companies compete for the same pool of power, hardware and workers, the cost of those inputs rises. That pressure can spread to other parts of the economy that rely on the same resources.
3. Lisa Cook and Michael Barr raise warnings
Fed Governor Lisa Cook laid out the inflation concern in a speech on September 28. She warned that AI-related investment was adding to price pressure and slowing progress back toward the Fed's 2% inflation target. Her remarks framed the AI buildout not as a future disinflationary force but as a present-day source of demand that the central bank has to account for.
Fed Governor Michael Barr added a different risk on Thursday, November 12. In a speech, he cautioned that businesses replacing human tasks with AI could cause what he called "serious short-term disruptions" in the labor market. His concern centers less on prices and more on jobs: the speed at which companies adopt automation could outpace the economy's ability to absorb displaced workers.
Warsh himself acknowledged the uncertainty in a speech on August 28, describing AI as "a new variable" for monetary policy. That phrase captures the problem facing the Fed. Its standard models were built on decades of data about how wages, prices and output interact, and a technology that could rapidly change all three does not fit neatly into those frameworks.
4. Two paths for interest rates
The debate leaves the Fed with a genuine dilemma, and each outcome points rates in a different direction.
In the first scenario, AI delivers on its promise. Businesses produce more without matching increases in cost, inflation cools, and policymakers gain room to lower interest rates. Cheaper money has historically made riskier assets more attractive, because bonds and savings accounts pay less, nudging investors toward growth stocks and assets such as Bitcoin in search of better returns.
In the second scenario, AI spending keeps inflation stubbornly high. The Fed might then hold rates where they are or raise them further. Higher borrowing costs make interest-bearing assets more appealing relative to speculative ones, and that shift can draw money out of crypto and other high-risk markets.
Which of these paths materializes depends heavily on timing. The essential question, as the forum's framing suggests, is whether the benefits of AI will show up soon enough to outweigh the costs of building it. Productivity gains that arrive years after the investment boom would do little to relieve the price pressure that the construction phase creates today.
5. Why is bitcoin dropping this week?
Bitcoin is dropping because investors fear the Fed may tighten policy again. The cryptocurrency fell below $69,000 on Friday, November 13, after inflation data came in stronger than expected and revived concern about another rate hike.
That reaction shows how closely crypto prices now track expectations for monetary policy. When inflation readings surprise to the upside, traders tend to price in a more restrictive Fed, and assets with no yield of their own, including Bitcoin, often come under pressure as a result.
Against that backdrop, the San Francisco forum carries extra weight. If participants conclude that AI is adding to inflation in the near term, it would reinforce the case for keeping rates high. If they find evidence that productivity gains are already arriving, it could soften that case. Either signal could matter for a market that is already reacting sharply to every hint about the Fed's next move.
6. Bitcoin miners compete with AI for power
The overlap between AI and crypto goes beyond interest rates. Both industries depend on vast supplies of electricity, and that shared need has turned them into competitors for the same resource.
As AI companies bid for power and data center capacity, Bitcoin miners are under pressure to lock in affordable electricity or consider whether their facilities would earn more serving AI customers. For many operators, the infrastructure they built for mining, including grid connections, cooling systems and large industrial sites, has become valuable to a different and often better-paying class of tenant.
Some miners have already made that switch. Hyperscale Data shut down Bitcoin mining at its Michigan facility in September to serve an AI customer, under an agreement that could be worth more than $1.2 billion. CoreWeave and several other companies that once mined Ethereum (ETH) under its earlier proof-of-work system have made similar transitions, repurposing their hardware and sites for AI computing.
This migration has implications for the broader Bitcoin network. Mining secures the blockchain, and the economics of mining depend on power costs. When AI demand drives up the price of electricity and data center space, it changes the calculation for every miner deciding whether to keep running machines or redirect capacity elsewhere.
7. Job losses and a weaker economy
Barr's labor market warning introduces a third possibility that complicates the picture further. If AI leads to significant job losses, consumer spending could weaken and economic growth could slow. A softer economy would likely push the Fed toward cutting rates rather than raising them.
Lower rates would ordinarily support risky assets, but the circumstances matter. A rate cut prompted by economic weakness is different from one prompted by cooling inflation. If investors become worried about a slowing economy, they may reduce risk across their portfolios, and Bitcoin could be among the assets they sell, even as borrowing costs fall.
That tension illustrates why the AI question is so difficult for policymakers and markets alike. The same technology could, depending on how it unfolds, produce lower inflation, higher inflation, or a jobs shock, and each outcome sends a different signal to the Fed and to crypto investors.
8. What comes next for the Fed
The November 16 conference will not decide the Fed's next interest rate move. That decision is scheduled for December 9, when policymakers meet to set rates.
What the forum may offer is a window into how Warsh and his colleagues are thinking about the AI boom. If the discussion leans toward the view that AI is a near-term inflation risk, markets may read it as a sign that rates will stay elevated for longer. If it leans toward productivity optimism, it could support expectations for eventual easing.
For Bitcoin holders, the practical takeaway is that the debate over AI and inflation has become a direct input into the factor that moves their market most: the cost of money. The views aired in San Francisco on Monday, and the data the Fed weighs ahead of its December 9 meeting, will help determine which way that factor turns.