When US President Donald Trump named Kevin Warsh as his nominee to take over as US Federal Reserve Chair after Jerome Powell’s term ends in May, markets breathed a sigh of relief. But Warsh is set to confront two major monetary-policy challenges, only one of which he appears likely to handle well.

The first challenge is the rapidly accelerating AI revolution. AI is on track to increase labour productivity significantly and weaken labour demand – trends that, together, will put downward pressure on both wages and prices. Already, major firms, such as Amazon, are shedding worker...