BIS study warns AI’s energy appetite is clouding interest rate signals

Introduction

Central bankers already have a tricky job. They read the economy's dashboard and decide where interest rates should go. A new study from the Bank for International Settlements suggests artificial intelligence is smudging the gauges.

What the BIS Paper Actually Says

BIS Paper No. 174 was published on October 8, 2026. Its authors are economists Leonardo Gambacorta and Salvatore Polizzi. On the positive side, the authors credit AI with supporting both climate mitigation and adaptation. They point to gains in energy efficiency, better forecasting, and innovation in low-carbon technologies.

The Risks of AI-Driven Changes

The paper warns that AI systems, especially those housed in data centers, add significantly to electricity consumption and the emissions that come with it.

Financial Stability Concerns

There is a financial stability concern as well. The authors highlight the substantial investments flowing into AI infrastructure and energy generation. If those investments deliver disappointing returns, the study warns, they could pose risks to financial stability.

Two Possible Roads for AI

The paper lays out two scenarios for how AI might unfold. The first is incremental, with AI gradually woven into markets and the wider economy. The second is transformative: a leap toward artificial general intelligence, or AGI, the hypothetical point where AI matches broad human capability.

Implications for Policymakers and Markets

For central banks, the core message is that environmental effects belong inside traditional monetary policy frameworks. Treating AI's energy demand as a separate climate topic risks missing how it shows up in inflation and output data. For investors, the paper points to a duality in AI adoption. The technology promises productivity and innovation, yet its energy costs could feed broader economic risks if power prices climb on data center demand.