Inflation Pressures to Persist Through Year-End Amid AI-Fueled Demand
Federal Reserve Governor Lisa Cook has warned that inflationary pressures will persist for several months due to rising oil prices and artificial intelligence-driven demand. Speaking at a conference on AI and emerging technologies in Oakland, California, Cook said that while the labor market is in a good position to withstand interest rate hikes, inflation remains 'too high for too long.' The 12-month inflation rate through August was about 3.8%, roughly double the Fed's 2% target.
Cook noted that inflationary pressures will continue due to AI-driven demand and rising oil prices stemming from the Middle East conflict. She also pointed out that supply chain disruptions are contributing to inflationary pressures, which she expects to persist for several months.
The Fed has already raised its benchmark interest rate by 0.25 percentage points to 3.75-4.00% on September 16th, marking the first benchmark interest rate hike in 3 years and 2 months. Financial markets are pricing in about a 75% probability that the Fed will implement an additional benchmark interest rate hike in October, and are also projecting a high likelihood of a third consecutive rate increase at the December meeting.