BofA Securities Global Economic Weekly: Should We Be Afraid of AI?
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BofA Securities challenges the apocalyptic narrative that artificial intelligence will trigger white-collar unemployment and economic collapse, arguing it contradicts both economic theory and historical evidence. The AI shock is more likely a Schumpeterian creative destruction where investment risks exist, but a depression does not ensue. As a supply shock, AI should lower costs, improve real profits, and boost overall real income, even if labor's share of income declines. Historical precedents demonstrate that new technologies ultimately create more jobs than they destroy.
The recent market sell-off stemmed from crowded positioning and multiple equilibria, resembling a bank run rather than fundamental deterioration. Regarding US inflation, the divergence between Truflation and official CPI stems primarily from differing housing measurement methodologies. Truflation uses mortgage costs while the BLS uses rents, making the alternative measure unreliable for policy decisions.
In the eurozone, core inflation momentum remains below target, with the February core year-over-year rate expected at 2.1%. This persistent undershoot should eventually drive European Central Bank rate cuts, potentially in the second half of 2026. The UK spring budget is unlikely to bring major changes, with fiscal space potentially improving to GBP 24 billion. Growth forecasts for the Philippines remain subdued, while South Africa maintains its fiscal consolidation path with a deficit at 4.5% of GDP.