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-
The rapid scaling of AI models and their increasing integration into economic processes are making their operational costs a significant factor for inflation and fiscal policy.
This research provides a foundational economic framework for understanding how AI inference costs will impact macroeconomic stability, inflation, and the efficacy of monetary policy.
Economic models will need to explicitly incorporate AI inference costs as a new and potentially significant component of production costs, directly affecting price stability and welfare.
- · AI infrastructure providers
- · Economists skilled in macro-modeling with AI
- · Central banks with adaptive policy frameworks
- · Firms with high AI inference dependencies and thin margins
- · Consumers in economies with high pass-through rates
- · Outdated macroeconomic policy models
AI inference costs will directly influence corporate pricing strategies and overall inflation rates.
Central banks may need to develop new tools or adjust existing ones to manage inflation driven by AI-related supply-side shocks.
National competitiveness could increasingly depend on managing AI inference efficiency and cost, leading to new forms of economic policy intervention.
This signal links to a primary source. Continuum Brief monitors and indexes it as part of the live intelligence stream — we do not republish source content.
Read at arXiv cs.LG