Chicago Fed President warns anticipated AI productivity gains and prolonged energy inflation could force higher interest rates in the U.S.
Chicago Federal Reserve President Austan Goolsbee stated that the surge in excitement over artificial intelligence’s productivity potential is itself inflationary, potentially requiring higher interest rates. He linked this to an ongoing oil shock tied to the Iran war, which has prolonged energy inflation longer than expected.
Goolsbee’s remarks contrast with the view held by the Trump administration and new Fed Chair Kevin Warsh, who argue AI is disinflationary and could justify rate cuts. He noted that anticipated productivity gains from AI trigger spending before actual improvements materialize, exacerbating inflationary pressures.
The official also highlighted that Asian economies, dependent on energy imports, face a stagflationary shock due to the oil crisis. The combination of AI hype and supply shocks could make inflation harder to control, he said.