Janet Yellen Warns AI Fueling Inflation, Not Reducing It
Former US Treasury Secretary and Federal Reserve Chair Janet Yellen has expressed concerns about the impact of artificial intelligence (AI) on inflation. She stated that AI is driving up prices more than reducing them, contrary to market expectations. According to Yellen, 'huge investments' in AI are leading to increased spending on semiconductors, electricity, and labor costs.
The former Fed chair argued that these factors are contributing to the surge in inflation, which has risen sharply this year, reaching 4.2% in May before falling back to 3.5%. Yellen believes that tightening monetary policy would 'probably' harm the labor market, but she is also concerned about the risk of rising inflation.
Yellen pointed out that part of the difficulty in controlling inflation stems from the White House's tariff policies and the impact of wars in the Middle East on oil prices. She noted that the 12-month US inflation rate has consistently hovered at or below 3% since 2025, but it has risen again this year.
The former Treasury Secretary also drew attention to a shift in the composition of holders of American debt: foreign central banks are reducing their holdings of Treasuries while increasing their gold reserves. Yellen attributed this movement to concerns about holding dollars in reserve due to potential sanctions, but she does not see a currency capable of taking the dollar's place as a global reserve currency.