Cook Warns of Continued Inflationary Pressures Ahead

Federal Reserve Governor Lisa Cook said she expects continued inflationary pressure in the coming months due to AI-related demand and higher oil prices. The labor market appears well-positioned to handle an increase in interest rates, but the number and magnitude of future rate hikes will be informed by observations of the economy's reaction to policy actions thus far.

Cook made these comments at a conference on AI and emerging technology in Oakland, California, where she joined a unanimous vote in support of raising the policy rate for the first time in three years. The decision was aimed at bringing inflation back down to the US central bank's 2% goal in a 'timelier' fashion.

Oil prices climbed about 2% on Monday after US President Donald Trump rejected a deal from Iran to reopen the Strait of Hormuz, and financial markets are now pricing in about a 75% chance of a Fed rate hike next month. Cook did not validate these expectations, but noted that inflation has been 'too high for too long' at around 3.8% over the past 12 months.

Cook expects AI-driven productivity gains to deliver some disinflation over the medium term, but those gains will not come fast enough to offset inflationary pressures this year. The inflation data shows effects are broadening beyond AI-focused sectors.