Waller outlines Federal Reserve's strategy for AI integration

Federal Reserve Governor Christopher J. Waller highlighted the central bank's comprehensive strategy for integrating artificial intelligence into its daily operations.

He emphasized that while the Fed is often associated with monetary policy, the bulk of its work involves operational tasks like payments, financial management, and providing services to the U.S. Treasury.

Waller noted a shift from a historical 'Bank-by-Bank' approach to a 'System-first' model, aiming for shared standards and infrastructure.

This coordinated approach is crucial for enhancing efficiency, resilience, and security across the interconnected systems the Fed operates, especially given the increasing volume and velocity of technological change.

Waller stressed the urgency of this transition, citing the rapid convergence of AI, stablecoins, tokenization, and payments.

He acknowledged the inherent risks of AI, such as amplifying errors, hallucination, data protection issues, model risk, and bias.

To mitigate these, the Fed is implementing clear guardrails, strong information-security controls, rigorous model validation, and human accountability for decisions.

Waller asserted that innovation and risk management are not competing priorities but rather reinforce each other, ensuring the Fed keeps pace with private sector advancements while upholding high standards.