Federal Reserve Governor Lisa Cook stated on Thursday that she views the inflationary impact of artificial intelligence development as a significant risk for 2027. She also noted that increasingly frequent supply shocks have had persistent effects and are becoming more prominent in policy considerations.
The Federal Reserve's focus on potential long-term inflationary risks from AI development highlights a new challenge for monetary policy. Persistent supply shocks, exacerbated by geopolitical events, could complicate the Fed's efforts to achieve its inflation target, potentially influencing future rate decisions.
Federal Reserve Governor Lisa Cook stated on Thursday that she views the inflationary impact of artificial intelligence development as a significant risk for 2027. Speaking at an event hosted by the New York Fed, Cook noted that increasingly frequent supply shocks have had surprisingly persistent effects and are becoming more prominent in policy considerations.
Cook expressed concern that the build-out of AI could create inflationary pressures that may not resolve quickly. While acknowledging that AI is likely to boost productivity in the long term, she voiced worries about the timing of these disinflationary gains and the potential for future supply bottlenecks. She also pointed to geopolitical considerations, such as the conflict in the Middle East, as factors that could further crimp supply chains.
Cook was part of the unanimous vote last month to raise the Fed's policy rate by a quarter of a percentage point to help bring inflation back to the central bank's 2% target. In August, the Fed's targeted inflation measure stood at 3.4%, having remained above the goal for more than five and a half years. Cook suggested that the optimal response to supply shocks might differ from conventional views, which previously assumed tighter monetary policy would not affect factors like oil prices or wars.
Pick the topics you care about. Get only what matters, on your cadence.
