Federal Reserve Chairman Kevin Warsh told lawmakers on Wednesday that the recent surge in investment tied to artificial intelligence is likely to push measured prices higher over the next 12 months, but he argued those price increases would not automatically amount to persistent inflation.
What he said and why it matters
Warsh told Congress: “Will it increase measured prices over the course of the next 12 months? I suspect it will.” He added: “Whether that's inflationary or not, that's up to the Federal Reserve — and we're going to have something to say about that.”
According to Warsh, the AI buildout is already boosting capital spending and bidding up chip prices, while policymakers remain uncertain about when broader productivity gains from the technology will materialize. He emphasized that a one‑time change in prices does not necessarily equal inflation because a supply response can follow.
The debate inside the Fed
Fed officials are weighing whether the AI investment boom's short‑term demand surge will add to inflation before any productivity gains arrive. New York Fed President John Williams has said the technology buildout is increasing demand for certain goods and electricity, and rising costs are beginning to affect prices. Fed Governor Christopher Waller has likewise pointed to AI investment as a source of strong economic demand.
Responding to a question from Senator Jack Reed (D‑R.I.) about his colleagues' views, Warsh called the discussion "one of the good family fights."
Testimony and political context
Warsh made the remarks during the second day of his semiannual monetary policy testimony to Congress, a legally required appearance by the Fed chair. These hearings were his first testimony on Capitol Hill since he took the reins of the Fed in May.
In an exchange with Senator Chris Van Hollen (D‑Md.), Warsh declined to confirm whether he has spoken with President Donald Trump since becoming Fed chair. He said he did not want to disclose private discussions with the president but provided assurance that, before Warsh assumed office, the president had not tried to influence the conduct of monetary policy.
What to watch next
Warsh said findings from five outside‑led task forces reviewing the Fed's monetary policy framework will be released in the months ahead. The groups are examining the Fed's communications, balance‑sheet strategy, economic data, productivity and employment, and inflation frameworks, and are co‑led by a roster of prominent outsiders including economists and business executives.
Warsh noted he is not very patient on timing: while some suggested years would be needed for the work, he gave the groups six months.
