AI Drives Inflation, Fed Warns of 'Painful Transition' Ahead

Federal Reserve Governor Lisa Cook has expressed concerns that artificial intelligence (AI) investment is contributing to inflation in the US. She spoke at Oakland Tech Week, where she noted that AI-related demand has driven up prices for chips, computers, and software.

Cook argued that the Federal Reserve should not use broad monetary-policy tools to address these narrow shifts because supply chains and efficiency gains could eventually ease them.

She warned of a broader risk from the AI infrastructure boom, citing increased competition for construction workers and energy used across the economy. Cook noted that companies have spent only a small fraction of the roughly $2 trillion in announced investment plans.

Cook expects AI to increase productive capacity and provide modest disinflation over the next few years, but said those benefits are unlikely to arrive fast enough to offset broader inflation later this year.