Fed's Cook warns AI build-out is an inflation risk that 'may not resolve very quickly'

Federal Reserve Governor Lisa Cook said on Thursday that artificial intelligence — and its inflationary push — is a top risk for 2027, warning that frequent supply shocks are proving surprisingly persistent and more salient for policy (Reuters).

“The AI build out is potentially creating inflationary pressures that may not resolve very quickly,” Cook told New York Fed President John Williams at an event at the regional Fed bank. “So I think this is one of the main things that concerns me right now for 2027.” The remarks were also carried by The Business Times and The Los Angeles Post.

Cook joined a unanimous vote last month at the Fed to raise the policy rate by a quarter of a point to support a “timelier” return of inflation to the 2% goal. Inflation by the Fed’s targeted measure was 3.4% in August and has been above the goal for more than five and a half years.

Like many at the Fed, Cook believes AI will boost productivity in the longer term — but she said: “I worry about when the productivity gains that would produce disinflation will come, and where the supply bottlenecks are going to be next.” She added that geopolitical factors, including the Middle East conflict, could also crimp supply chains.

Cook said the old doctrine of “looking through” supply shocks may no longer hold: the “optimal response” could now differ “depending for instance on the sectors affected by the supply shocks.”