Fed Governor Lisa Cook expects AI-related demand and higher oil prices to keep inflation under pressure in coming months, but said future rate adjustments will depend on economic and inflation data. Inflation was about 3.8% in the 12 months through August, versus the Fed's 2% target.
Cook said she expects continued inflationary pressure from the AI buildout, higher oil prices and supply chain disruptions associated with the conflict in the Middle East. She said AI-related productivity gains may reduce inflation over the medium term but will not offset this year's pressures quickly enough.
Cook said the labor market appears well positioned to handle higher rates and that future adjustments will depend on the economy's response to policy and on inflation and labor data. She did not endorse market expectations for rate increases next month and in December.
Cook said she sees little evidence so far that AI is remaking the labor market, but is highly attentive to the possibility that it could temporarily raise unemployment. She said a rate cut intended to support the labor market could fuel inflation.
