Fed's Cook sees AI inflationary push as a top 2027 risk
TLT•Federal Reserve Governor Lisa Cook said AI-related investment could create inflationary pressures that may persist, making it a top risk for 2027. She also warned that supply shocks are having more persistent effects and could change the Fed’s optimal policy response.
1. AI and inflation risks
Cook said the AI buildout could create inflationary pressures that may not resolve quickly, and called it one of her main concerns for 2027. She said she expects AI to boost productivity over the longer term but is concerned about when those gains will arrive and where supply bottlenecks will emerge.
2. Supply shocks and policy
Cook said increasingly frequent supply shocks have had surprisingly persistent effects and become more salient for monetary policy. She cited geopolitical factors, including the Middle East conflict, as potential constraints on supply chains and said the Fed’s optimal response could depend on which sectors are affected. Last month, she joined a unanimous vote to raise the policy rate by a quarter point; inflation measured by the Fed’s targeted gauge was 3.4% in August, above the Fed’s 2% goal for more than 5-1/2 years.
