Federal Reserve Chairman Warsh watches AI token prices for clues on productivity and inflation

The Federal Reserve now has a new data point on its radar. Fed Chairman Kevin Warsh used his Jackson Hole keynote on August 28 to spotlight an unusual metric: the price dynamics of AI tokens, the units that measure how much data an AI model processes per query. AI companies typically charge customers based on token consumption, making token pricing a surprisingly clean proxy for how aggressively businesses are adopting the technology. Warsh noted that AI labs’ token sales have surpassed $100 billion, representing growth of more than 500% from the prior year. What Warsh actually said, and why it matters The chairman described artificial intelligence as a potential “new factor of production,” placing it in the same conceptual bucket as labor, capital, and land. That framing implies AI could fundamentally alter how the Fed thinks about the economy’s productive capacity, and by extension, how it sets interest rates. But Warsh didn’t just cheerlead. He posed a pointed question: will customers continue paying premium prices for tokens generated by the most advanced frontier models, even as older models see their prices collapse toward marginal cost? The answer to that question could reve...