The Economics of AI Inference: Inflation Dynamics, Welfare Costs, and Optimal Monetary Policy under the Inference-Cost Phillips Curve

arXiv:2605.20281v1 Announce Type: cross Abstract: We develop a unified microeconomic and monetary theory of artificial intelligence inference costs and their pass-through to inflation, welfare, and optimal monetary policy. We introduce the Inference-Cost Phillips Curve (ICPC), an augmented New Keynesian Phillips curve in which firm-level marginal costs of producing differentiated goods include a non-trivial AI inference component lambda-bar, and prove a closed-form structural slope kappa*_inf = lambda-bar * kappa, where kappa is the standard Calvo-Yun slope. We derive a welfare-relevant Hicks-

Source: arXiv cs.LG — read the full report at the original publisher.

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