Cook, An Update on AI and the Economy

AI desk brief

Fed Governor Cook said AI is already affecting inflation and the policy outlook, with prices for AI-related goods such as chips, computers and software surging and data-center investment adding broader cost pressure through construction labor and energy. She cited electricity and water costs up about 5% over the past year and core goods inflation running over 3% YTD, warning that AI-driven demand could broaden inflation pressure before productivity gains arrive.

Cook argued a productivity boom could eventually provide modest disinflation, but not soon enough to offset near-term inflationary effects. For metals, the message is modestly hawkish: stronger AI-led demand and broader inflation risks point to sticky policy and elevated real-rate pressure in the near term.