Goolsbee says AI-induced inflation is 'jumping out of its lane,' Semafor reports

Federal Reserve Bank of Chicago President Austan Goolsbee warned on Tuesday that the surge in inflation due to the artificial intelligence investment boom is now starting to feel like "aggregate overheating". According to Goolsbee, AI data center cost increases are "jumping out of its lane", leading to price increases in areas beyond just components and adjacent industries.

He explained that prices are rising in general services as well, as investment goods are propelling GDP growth faster than potential, causing spillover inflation. Goolsbee emphasized that unlike supply shocks, overheating demand is a major concern because it is difficult to eliminate and takes a significant amount of time to start.

He suggested that if inflation remains persistent, the Federal Reserve must act decisively to prevent the situation from escalating and impacting inflation expectations.