Federal Reserve Governor Lisa Cook said Thursday that the rapid expansion of artificial intelligence could become a major source of inflationary pressure in 2027, particularly if supply constraints persist.
Speaking with New York Fed President John Williams at an event hosted by the regional Federal Reserve Bank, Cook said the investment and infrastructure buildout linked to AI could create price pressures that take longer than expected to fade.
“The AI build out is potentially creating inflationary pressures that may not resolve very quickly,” Cook said, describing the issue as one of her main concerns for 2027.
Cook’s comments come as the Federal Reserve continues to contend with inflation that remains above its 2% target. She joined a unanimous Fed decision last month to raise the policy rate by a quarter percentage point, supporting what she described as a “timelier” return of inflation to the central bank’s goal.
The Fed’s preferred inflation gauge stood at 3.4% in August and has remained above the 2% target for more than five and a half years.
AI Growth Could Bring Both Productivity and Supply Pressures
Cook said she expects AI to deliver productivity gains over the longer term, potentially helping reduce inflation. But she questioned how quickly those benefits will emerge, particularly as businesses compete for resources and capacity to support the technology boom.
“I worry about when the productivity gains that would produce disinflation will come, and where the supply bottlenecks are going to be next,” Cook said.
She also pointed to geopolitical developments, including the conflict in the Middle East, as another potential threat to global supply chains.
Traditionally, central bankers have often viewed supply shocks such as higher oil prices or disruptions caused by war as factors monetary policy cannot directly resolve. Raising interest rates does not increase oil supplies or end geopolitical conflicts, Cook noted.
However, she said the Federal Reserve may need to reconsider how it responds when supply disruptions affect different parts of the economy.
The appropriate policy response, she said, could depend on which sectors are hit and how supply shocks influence employment, output and broader inflation.
