Fed's Cook projects AI and oil costs to keep inflation elevated

September 28, 2026 at 11:13 PM2 min

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Federal Reserve Governor Lisa Cook said Monday she expects AI investment and higher oil prices to keep upward pressure on inflation in coming months. She signaled any further rate hikes would depend on incoming economic data. Cook spoke in Oakland, California, warning that AI-driven demand could broaden price pressures beyond the technology sector.

Key Facts

Cook said electricity and water costs have risen about 5% over the past year.
Core goods prices are running over 3% this year, Cook added.
Cook said a large portion of the rise in stock prices over the past few years can be attributed to enthusiasm about AI.
Cook said attempting to fight sector-specific inflation from AI with rate hikes could be a mistake because the Fed's tools are too blunt to target narrow sectors.

Inflation Pressures

Cook said she expects continued pressure on inflation from the AI build-out and from the pass-through of higher oil prices and supply chain disruptions associated with the conflict in the Middle East. She noted that prices for AI-related goods such as chips, computers, and software have surged, reflecting demand in those sectors rather than economy-wide inflation. Cook said signs in the inflation data suggest the pressure may be broadening, pointing to electricity and water costs that have risen around 5% over the past year. She also noted core goods prices are running over 3% this year.

Policy Stance

Cook said any further interest rate hikes would be contingent on economic data, and she will consider what policy rate may be needed to guide inflation down to the Fed's target. She cautioned that trying to quell inflation in specific sectors stemming from AI with rate hikes would be a mistake, saying the Fed's tools are too blunt to target narrow sectors. Cook said she does see some economy-wide pressure from AI-fueled demand, citing data center investments that rely on construction labor and energy and are widely used across many other sectors. She said a large portion of the rise in stock prices over the past few years can be attributed to enthusiasm about AI, and that added wealth appears to be feeding through to household spending.