IMF Warns AI Restrictions Could Weaken Growth, Complicate Central Banks’ Inflation Battle

IMF warns AI restrictions could slow growth, complicate global inflation fight

Georgieva says weaker technology investment may pose fresh challenges for central banks as market volatility raises financial stability concerns

The International Monetary Fund (IMF) has warned that tighter restrictions on artificial intelligence (AI) could slow investment, weaken economic growth and complicate efforts by central banks to contain persistent inflation.

IMF Managing Director, Kristalina Georgieva, said any slowdown in economic activity driven by reduced AI investment would have implications for monetary policy decisions, particularly as countries continue to battle stubborn price pressures.

Her comments come amid plans by US Democrats to introduce stricter regulations targeting AI companies and data centre development after assuming control of Congress in January.

The proposed measures are expected to address rising electricity costs associated with data centres, introduce independent safety assessments for advanced AI systems and strengthen corporate accountability for technology-related harm.

Speaking at the IMF headquarters in Washington, Georgieva said concerns about heavy dependence on AI investment and elevated technology company valuations were already contributing to uncertainty in global financial markets.

She noted that the AI investment boom had supported economic growth in several countries and helped cushion the impact of the oil supply disruption linked to the conflict in the Middle East.

However, she warned that the rapid expansion was also contributing to inflationary pressures and financial stability risks.

Georgieva said central banks would need to consider any weakening in AI-driven economic activity when determining appropriate responses to persistent inflation.

Her remarks followed a sharp sell-off in technology stocks as investors reacted to fears of tighter regulatory oversight and uncertainty over whether massive investments in AI infrastructure would generate sufficient returns.

The IMF had previously warned that a sharp decline in AI investment could trigger falling asset prices and reduce global economic output by 1.1 per cent by 2028. Under that downside scenario, US output could fall by 1.8 per cent.

Meanwhile, the proposed US regulatory changes could face resistance from President Donald Trump’s administration, which has opposed mandatory federal restrictions on AI development.

The IMF’s warning underscores the growing influence of artificial intelligence investment on economic growth, financial markets and global monetary policy.