Fed’s Cook sees AI buildup as top inflation risk for 2027

Federal Reserve Governor Lisa Cook has identified artificial intelligence development as a primary inflation concern for 2027, citing potential supply pressures from the technology's expansion. During an event alongside New York Fed President John Williams, Cook warned that AI's growth may generate price pressures that persist longer than anticipated. She noted that supply shocks have demonstrated more enduring effects than previously believed and have gained increasing importance in monetary policy decisions.

Cook joined a unanimous vote last month to raise the policy rate by a quarter point in an effort to accelerate inflation's return to the Fed's 2% target. Inflation, measured by the Fed's preferred gauge, has been at 3.4% in August and has stayed above the central bank's goal for over five and a half years. Cook shared the views of many Fed officials that AI will eventually boost productivity, but expressed concerns about the timing of those benefits.

The reductions in inflation, which could aid in alleviating price pressures, remain uncertain. Moreover, Cook highlighted geopolitical factors, such as the conflict in the Middle East, as potential threats to supply chains.