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AI-Powered Algorithmic Pricing and Monetary Policy

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The business practice of adjusting prices using algorithms powered by artificial intelligence—known as AI pricing—has grown rapidly and spread across many sectors in the economy. Unlike traditional price setting, AI pricing uses predictive analysis of large data sets to incorporate real-time changes in supply and demand conditions into pricing decisions. This enables businesses to adjust prices more quickly in response to unexpected changes in market conditions and monetary policy. Industry-level evidence suggests that price adjustments are more sensitive to monetary policy in sectors where AI pricing is more prevalent.

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  • Greeshma Avaradi & Zheng Liu & Steven Zhao, 2026. "AI-Powered Algorithmic Pricing and Monetary Policy," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, vol. 2026(12), pages 1-5, May.
    • Handle: RePEc:fip:fedfel:103235
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