The rapid advancement and integration of artificial intelligence (AI) within various sectors could play a crucial role in reducing inflation and potentially lead to more aggressive rate cuts by the Federal Reserve, according to a recent report by Coinbase research analysts David Duong and David Han.
The analysts highlight that many crypto projects are increasingly intertwined with AI, which has boosted competition for processing chips. However, they foresee AI and technology-driven efficiency gains affecting the cryptocurrency market in a more indirect manner — by reducing inflation.
“We believe that the disinflationary impacts of artificial intelligence and technology-driven efficiency gains will continue to push this trend of moderating inflation throughout this year,” Duong and Han stated in their report released on Friday.
The report further elaborates that these AI-driven efficiencies, coupled with growing political pressure for monetary easing in the U.S., could support the case for earlier and more aggressive rate cuts than those currently indicated by the Federal Reserve.
“When rate cuts begin, we think that will be a constructive catalyst for both equities and crypto as it could lead to capital outflows from money market funds, currently holding $6.4 trillion, into other asset classes,” the analysts noted.
Following the FOMC – Federal Open Market Committee meeting on Wednesday, interest rate traders are anticipating a potential rate cut as early as September this year. Coinbase analysts support this forecast, suggesting an additional rate cut might occur in November due to the persistent disinflationary trend, despite concerns over shelter costs.