Fed's Cook warns inflation pressures to persist for months

Federal Reserve Governor Lisa Cook said inflation pressures will continue for the next several months, driven by AI-related demand and rising oil prices.

Speaking at an AI and emerging technology conference in Oakland, California, on Monday (local time), Cook said the labor market "appears to be in a good position to withstand further interest rate increases" and that she would be examining "what policy rate will be needed to bring inflation down to our 2 percent target," according to Reuters.

She added that "the number and size of future rate adjustments will, of course, depend on how the economy has responded to policy actions so far and on inflation and labor market data over the coming months."

Cook said inflation had remained "too high for too long," noting that over the 12 months through August it ran at about 3.8 percent — roughly double the Fed's 2 percent target. She said "inflation pressures will continue over the coming months due to the spread of AI and the pass-through of higher oil prices and supply chain disruptions stemming from the Middle East conflict."

She said productivity gains driven by AI could bring some disinflation over the medium term, but that this year such effects would not materialize quickly enough to offset inflation pressures.

The Fed raised its benchmark interest rate by 25 basis points to a range of 3.75 to 4.00 percent on Sept. 16 — its first rate increase in three years and two months.

Financial markets are pricing in roughly a 75 percent chance of another rate hike in October, and also see a strong likelihood of a third consecutive increase at the December meeting.