In a speech at Stanford University, Federal Reserve Board Governor Lisa D. Cook said elevated risks to both sides of the Fed's dual mandate mean the appropriate course for now is to hold rates steady, while stressing that the balance of risks still points to higher inflation. She said personal consumption expenditures inflation is estimated at 3.8 percent over the 12 months to April, with core inflation at 3.3 percent, and argued that alongside energy prices and tariffs, AI-related investment could add to price pressures as more than USD 1.5 trillion in data-center plans has been announced. At the same time, she described the labor market as broadly stable, with unemployment at 4.3 percent, but said downside risks to hiring and employment remain elevated and AI could eventually increase labor-market churn even if job creation follows later. Cook also said AI could lift productivity, GDP growth, and efficiency across financial services, including compliance, back-office operations, analytics, coding, and potentially credit access and capital allocation. In the same speech, she warned that AI could create or amplify financial stability risks through more correlated or manipulative algorithmic trading, disruption to sectors such as software, rising leverage to finance AI infrastructure, and new cyber vulnerabilities. She said the Fed is not using AI to develop or set monetary policy, but is deploying it in financial-stability work, including newly formed teams assessing technology risks, smaller AI models that cut computation costs by up to 80 percent while maintaining accuracy, and systemwide agentic AI experiments aimed at improving analysis of network risks and scenario testing. Cook said she is prepared to raise rates if disinflation does not resume in a timely manner and to ease policy if the labor market deteriorates.
Federal Reserve Board2026-05-27
Federal Reserve Board Governor Cook says rates should stay steady and flags AI-driven inflation and stability risks
Federal Reserve Governor Lisa D. Cook said elevated risks to inflation and employment argue for holding rates steady, noting risks still tilt toward higher inflation and she is prepared to raise rates if disinflation stalls or ease if the labor market weakens. She said artificial intelligence (AI) investment could add to price pressures and labor-market churn even as it boosts productivity in financial services, and warned AI may amplify financial stability risks. Cook outlined how the Fed is using AI in financial-stability analysis, including new technology-risk teams, smaller AI models, and systemwide agentic AI experiments.