6 hrs ago
Fed’s Lisa Cook Flags AI Inflation Risk for 2027
Lisa Cook is an official at the Federal Reserve, which helps guide the economy.
She said artificial intelligence could make prices rise in 2027.
This could happen because companies are rapidly building AI systems and may face shortages.
Cook still believes AI could eventually help workers and businesses become more productive.
However, she does not know when those benefits will lower inflation.
She also said supply problems are lasting longer than officials once expected.
Conflicts, including one in the Middle East, could create more supply disruptions.
The Federal Reserve may need to respond differently depending on which parts of the economy are affected.
Federal Reserve Governor Lisa Cook identified AI-related inflationary pressure as a major risk for 2027.
Cook said the AI buildout could create inflationary pressures that take time to resolve.
She expects AI to raise productivity over the longer term but is uncertain when disinflationary gains will arrive.
Cook said increasingly frequent supply shocks have had unexpectedly persistent effects on policymaking.
She said geopolitical events, including the Middle East conflict, could disrupt supply chains and alter the Fed’s response.
- Who
- Federal Reserve Governor Lisa Cook, speaking with New York Fed President John Williams.
- What
- Cook warned that AI-related inflationary pressure is a major risk for 2027 and discussed how persistent supply shocks may affect monetary policy.
- Where
- An event at the Federal Reserve Bank of New York.
- When
- October 1; Cook referred to 2027 as the key risk horizon and to a rate increase approved the previous month.
- Why
- The rapid AI buildout may create supply bottlenecks and inflationary pressure, while geopolitical conflicts could further disrupt supply chains.
Inflationary Risks
Potential Productivity Benefits
Near-term economic effect
Inflationary Risks
The AI buildout could create supply bottlenecks and inflationary pressure that may not resolve quickly.
Potential Productivity Benefits
AI could eventually improve productivity, producing disinflationary effects over the longer term.
Monetary-policy response
Inflationary Risks
Persistent supply shocks may require the Federal Reserve to consider a different response, depending on the sectors affected.
Potential Productivity Benefits
Traditional policy thinking held that monetary policy should look through supply shocks because higher rates cannot directly change oil prices or stop wars.
Key facts
- Speaker
- Federal Reserve Governor Lisa Cook
- Main risk
- AI-related inflationary pressure in 2027
- Inflation target
- The Federal Reserve’s goal is 2%
- Latest inflation cited
- 3.4% in August under the Fed’s targeted measure
- Rate decision
- Cook joined a unanimous vote the previous month to raise the policy rate by 0.25 percentage points
- Long-term AI effect
- Cook expects AI to eventually increase productivity
- Other supply risk
- Geopolitical events, including the Middle East conflict, could disrupt supply chains
Quotes
Lisa Cook
Federal Reserve governor
“Our conventional view used to be that we would look through the supply shocks because tighter monetary policy is not going to have an effect on oil prices, not going to have an effect on a war, but it could slow down employment and output outcomes that we would be more concerned about.”
livemint.com
“The AI build out is potentially creating inflationary pressures that may not resolve very quickly. So I think this is one of the main things that concerns me right now for 2027.”
livemint.com
Sources
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