Federal Reserve Governor Lisa Cook said Monday rising demand for artificial intelligence is leading to “broadening” inflationary impacts, with implications for the entire economy. During a keynote speech at the Oakland Tech Week conference, Cook noted that prices for Al-related goods, including chips, computers and software, have “surged” in the past year. “I believe that some of these steep price increases reflect a shift in demand toward AI-related sectors rather than an increase in economy-wide demand,” she noted, adding that supply chains will adjust and resolve the resulting price pressures “without policy intervention.” Annual inflation has remained above the Fed’s 2 percent target for five-plus years, and was 3.4 percent last month, as measured by the consumer price index. The Bureau of Economic Analysis will release the personal consumption expenditures price index, the central bank’s preferred inflation metric, on Wednesday morning. While Cook argued the central bank attempting to fight “sector-specific inflation” via monetary policy tools “could be a mistake,” she acknowledged “some economy-wide pressure” from AI demand. “Data center investment relies on inputs, like construction labor and energy, that are broadly used in many sectors in the economy. As a result, increased AI investment could introduce price pressure to those other sectors,” she said. “You can see signs in the inflation data that the pressure may be broadening,” Cook later remarked, pointing to increased electricity and water costs. The Federal Open Market Committee, which Cook is a member of, voted unanimously earlier this month to raise interest rates by a quarter point amid persistent inflation. The decision came despite President Trump calling on the rate-setting panel to cut rates. Cook, whose firing by Trump was blocked by the Supreme Court over the summer, noted Monday that inflation “has been too high for too long.” But the Fed governor did not commit to any future monetary policy decision, noting the “number and magnitude of any future adjustments” will depend on how the economy reacts to the Fed’s recent rate hike. “Looking ahead, I will consider what policy rate may be needed to continue to guide inflation down to our target,” Cook said. Traders are pricing in a roughly 70 percent chance that the FOMC will again hike interest rates by a quarter point at its next meeting in late October, according to the CME FedWatch tool.

Federal Reserve Governor Lisa Cook said Monday rising demand for artificial intelligence is leading to “broadening” inflationary impacts, with implications for the entire economy. During a keynote speech at the Oakland Tech Week conference, Cook noted that prices for Al-related goods, including chips, computers and software, have “surged” in the past year. “I believe that some of these steep price increases reflect a shift in demand toward AI-related sectors rather than an increase in economy-wide demand,” she noted, adding that supply chains will adjust and resolve the resulting price pressures “without policy intervention.” Annual inflation has remained above the Fed’s 2 percent target for five-plus years, and was 3.4 percent last month, as measured by the consumer price index. The Bureau of Economic Analysis will release the personal consumption expenditures price index, the central bank’s preferred inflation metric, on Wednesday morning. While Cook argued the central bank attempting to fight “sector-specific inflation” via monetary policy tools “could be a mistake,” she acknowledged “some economy-wide pressure” from AI demand. “Data center investment relies on inputs, like construction labor and energy, that are broadly used in many sectors in the economy. As a result, increased AI investment could introduce price pressure to those other sectors,” she said. “You can see signs in the inflation data that the pressure may be broadening,” Cook later remarked, pointing to increased electricity and water costs. The Federal Open Market Committee, which Cook is a member of, voted unanimously earlier this month to raise interest rates by a quarter point amid persistent inflation. The decision came despite President Trump calling on the rate-setting panel to cut rates. Cook, whose firing by Trump was blocked by the Supreme Court over the summer, noted Monday that inflation “has been too high for too long.” But the Fed governor did not commit to any future monetary policy decision, noting the “number and magnitude of any future adjustments” will depend on how the economy reacts to the Fed’s recent rate hike. “Looking ahead, I will consider what policy rate may be needed to continue to guide inflation down to our target,” Cook said. Traders are pricing in a roughly 70 percent chance that the FOMC will again hike interest rates by a quarter point at its next meeting in late October, according to the CME FedWatch tool.