Federal Reserve Governor Cook: "AI Investment Boom a Risk Factor for Inflation in 2027"

[Financial News]  Lisa Cook, a governor of the Federal Reserve System (Fed), pointed to inflationary pressure stemming from the construction of artificial intelligence (AI) infrastructure as a major risk factor for the economy going forward.
On the 1st (local time), Federal Reserve Governor Lisa Cook spoke with Federal Reserve Bank of New York (FRBNY) President John Williams at an event held at the FRBNY. She said, "The expansion of AI infrastructure buildout could generate inflationary pressures that would be difficult to resolve in the short term," adding, "This is one of the key factors of concern as we look toward 2027."
At last month's Federal Open Market Committee (FOMC) meeting, Cook voted in favor of raising the benchmark interest rate by 0.25 percentage point to bring inflation back to its 2% target more quickly. The inflation gauge watched by the Fed stood at 3.4% as of August, remaining above its target for more than five and a half years.
While agreeing with the prevailing view within the Fed that AI will improve productivity over the long term, she added, "I am concerned about when productivity gains that will drive disinflation will begin to materialize in earnest, and where the next supply bottleneck will occur."
She also identified geopolitical risks, including conflicts in the Middle East, as factors that could constrict supply chains.
Cook explained, "In the past, there was a tendency to treat supply shocks as temporary and move on, because tight monetary policy could not directly affect oil prices or wars and could instead weaken employment and production." However, she stressed, "The impact of the more frequent supply shocks we have seen recently on monetary policy has been highly persistent. The Fed's optimal response may also vary depending on the industries in which the shocks occur, among other factors."


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