The Chicago Fed president says broader demand pressures could complicate a return to interest rate cuts.
Chicago Federal Reserve President Austan Goolsbee warned that the AI investment boom may be driving inflation beyond data centers and related industries, Reuters reported Tuesday, citing a Semafor interview.
Goolsbee said rising costs increasingly resemble economy-wide excess demand rather than temporary supply disruptions. He warned that investment could push economic growth above sustainable capacity and spread price pressures into services.
He said demand-driven inflation can persist and requires a prompt policy response before households and businesses come to expect continuing price increases.
Goolsbee, who does not vote on monetary policy this year, said a return to rate cuts would require evidence that inflation linked to tariffs and the oil shock is easing.
The Fed raised its benchmark rate by a quarter percentage point in September to 3.75%-4.00%, its first increase in three years, after three cuts in 2025.
The CME FedWatch tool currently shows a more than 77% probability that the Fed will hold rates steady at its October 28 meeting, while markets price in a more than 70% chance of a 25 basis point rate hike in December.
