Lisa Cook, a governor of the Federal Reserve (Fed), warned that productivity improvements expected from artificial intelligence (AI) will not arrive quickly enough to counteract inflationary pressure anticipated in the near term. Bloomberg reported her remarks, made at an event in Oakland.
Monetary policy and the recent rate move
Cook said the Fed’s unanimous decision this month to raise interest rates by 25 basis points was a necessary step to address persistently high inflation. Policymakers’ median projections indicate at least one additional rate hike is likely by year-end.
The article also cites Kevin Warsh, described in the report as stating that the move aimed to bring inflation closer to the Fed’s 2 percent target.
Data-center investment and cost pressures
Cook noted that large-scale investments in data centers are already intensifying competition for shared inputs such as energy and construction labor. Over the past year, electricity and water costs have risen by roughly 5 percent, adding to upward price pressure.
Although companies have so far spent only a fraction of the roughly $2,000 billion in pledged capital, the stock-market rally driven by the AI boom may stimulate consumer spending, creating further inflationary risk.
Timing of productivity gains and uncertainty
Cook acknowledged that productivity gains from AI could exert a modest disinflationary influence over the next few years. However, she argued these effects are unlikely to arrive in time to offset inflationary pressures building in the second half of this year. She stressed substantial uncertainty about when and how these processes will play out and called for additional research to better understand their impact.
Market expectations and the labor market
Futures markets currently price about a 70 percent probability of another rate increase in October. Recent public comments from Fed officials have highlighted ongoing economic momentum and a strong labor market as reasons that further tightening may be necessary.
Regarding the labor market, Cook said it is well-positioned to absorb rate increases: unemployment has been trending down and other indicators suggest the labor market is roughly in balance and gradually improving. Broader economic data likewise point to notable resilience over the past year.
Conclusion
Cook’s remarks underscore that while AI could raise productivity over the longer term, the timing and scale of those benefits remain uncertain and are unlikely to eliminate the need for near-term monetary policy action to contain inflation.
(The article’s lead image is illustrative. An AI assistant helped prepare this story; the final content was edited and verified by our journalist.)
