Warsh: AI spending may lift prices without fueling lasting inflation
Federal Reserve chairman Kevin Warsh said on Wednesday that the AI investment boom will likely raise prices over the next year, but argued that those increases might not automatically be inflationary. Why it matters: Warsh drew one of his clearest distinctions yet between the AI boom's immediate price effects and persistent inflation — a nuance that could shape policymakers' response as investment remains strong.What they're saying: "Will it increase measured prices over the course of the next 12 months?
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Federal Reserve chairman Kevin Warsh said on Wednesday that the AI investment boom will likely raise prices over the next year, but argued that those increases might not automatically be inflationary. Why it matters: Warsh drew one of his clearest distinctions yet between the AI boom's immediate price effects and persistent inflation — a nuance that could shape policymakers' response as investment remains strong.What they're saying: "Will it increase measured prices over the course of the next 12 months? I suspect it will," Warsh told lawmakers. "Whether that's inflationary or not, that's up to the Federal Reserve — and we're going to have something to say about that."Warsh said the AI boom is already driving capital spending and bidding up the price of chips, while policymakers are still largely guessing when the technology's broader productivity benefits will materialize."I don't view a one-time change in prices as necessarily being inflationary, because I think there's a supply response in that way," he said.The big picture: Fed officials are debating whether the AI investment boom's near-term burst of demand will add to inflation before its potential productivity gains arrive — on top of the price surges fueled by the Iran war.New York Fed President John Williams has said the technology buildout is increasing demand for certain goods and electricity, with rising costs beginning to affect prices.
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- Federal Reserve chairman Kevin Warsh said on Wednesday that the AI investment boom will likely raise prices over the next year, but argued that those increases might not automatically be inflationary. Why it matters: Warsh drew one of his clearest distinctions yet between the AI boom's immediate price effects and persistent inflation — a nuance that could shape policymakers' response as investment remains strong.What they're saying: "Will it increase measured prices over the course of the next 12 months?
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Warsh: AI spending may lift prices without fueling lasting inflation
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