The U.S. Federal Reserve officials are struggling to understand the impact of artificial intelligence on the economy, with a divide emerging over its potential to impact the labor market and inflation. The announcement by tech firm Block, which plans to cut 40% of its workforce due to AI, highlighted the stakes. The transition has raised a different response, with officials suggesting higher unemployment rates may be expected, with displaced workers taking longer to find new jobs and the higher capital returns and wages for those still working keeping upward inflation. Fed chair nominee Kevin Warsh, who believes interest rates should fall in part to account for AI-driven productivity gains, has also been met with caution among Fed policymakers about how fast AI will translate into staffing practices. The Fed is working to keep pace with the development of ChatGPT, a new system of AI-based technology that aims to improve employee productivity.