Fed’s Lisa Cook says AI spending is adding to inflation

AI hardware and software prices have jumped. Cook reads much of that rise as demand shifting towards AI sectors. Aiming interest rates at one sector’s prices “could be a mistake”, she warned.

The wider pressure comes from data centres. They compete for construction workers and energy with the rest of the economy. Companies have so far spent a small share of the roughly $2 trillion in AI investment they have announced, Cook said.

On jobs, unemployment stood at 4.1 per cent in August, she noted, and she finds little sign of broad disruption. She sees signs that AI may be cutting demand for coders and simultaneous translators, and entry-level roles are under pressure. Her concern is a mismatch between workers’ skills and open jobs. The Fed’s tools do little to fix that.

The Fed raised rates by a quarter point earlier in September. Traders see about a 70 per cent chance of another rise in late October, The Hill reports.

For businesses buying AI tools, an official who helps set borrowing costs now counts the AI boom among the reasons those costs stay high.