Fed Governor Lisa Cook said AI investment is delaying a return to 2 percent inflation, citing electricity and water costs up about 5 percent over the past year. The Black Executive Journal — Daily Edition
Federal Reserve Governor Lisa D. Cook gave the opening keynote at Oakland Tech Week on Monday, an event cohosted by the Kapor Center, with a speech titled "An Update on AI and the Economy" (Federal Reserve — Sep 28, 2026).
She called AI a general-purpose technology comparable to — or larger than — the steam engine, electricity and the internet. She then split its economic effects into three horizons.
In the short term, AI investment adds to inflation and delays the return to 2 percent. In the medium term, productivity may ease inflation modestly while the labor market goes through what she called a possibly painful transition.
In the long term, AI-driven productivity could raise living standards for all Americans. She noted that the views are her own.
"To fully recognize the benefits of AI, we must pair optimism with caution and be cognizant of valid concerns AI may pose for privacy, bias, workers, fraud, cybersecurity, and intellectual property rights."
-Lisa Cook, Fed Governor
Cook said much of the price surge in chips, computers and software reflects demand shifting toward AI sectors.
That kind of sector-specific pressure should ease as supply chains adjust. She warned that using monetary policy against it "could be a mistake," because the Fed's tools are too blunt to target narrow sectors. The broader concern is data-center investment, which competes for construction labor and energy used across the whole economy.
She said companies have spent only a small fraction of roughly $2 trillion in announced AI investment plans. She also said AI-driven equity gains appear to be feeding into household spending.
"Electricity and water costs are each up around 5 percent over the past year, potentially attributable in part to AI, and core goods prices, which were drifting down before the pandemic, are running over a 3 percent annual pace so far this year," Cook said (Federal Reserve — Sep 28, 2026).
"Currently, I anticipate that productivity gains will provide modest disinflation within the next few years. However, I do not expect those effects to arrive in time to offset the broadening inflationary pressure later this year," she said. Cook set out cases where AI brings more disinflation than expected.
Each involves weaker demand: productivity gains concentrated among higher-income households, gains not reaching wages because workers have little bargaining power, or job losses that push households to save more.
In the opposite case, market concentration keeps markups high and productivity gains never reach prices.
Cook said there is limited evidence so far that AI is restructuring the labor market — unemployment and layoffs "remain low." She pointed to signs of weaker demand for coding and simultaneous-translation jobs, and to recent college graduates having a harder time finding first jobs, "possibly partly related to AI's ability to take on entry-level tasks."
In a scenario where AI temporarily raises unemployment through a skills mismatch, "we at the Fed would have limited tools. We could lower the federal funds rate in an attempt to bring down high unemployment, but that could risk fueling inflation."
Cook pushed back on the idea that only large firms can use advanced AI.
Citing the Federal Reserve Small Business Credit Survey, she said nearly half of small employer firms use AI and 71 percent of those report higher productivity.
She noted that firms with fewer than 500 employees make up more than 99 percent of US businesses and have accounted for 61 percent of net new jobs since 1995 (Federal Reserve — Sep 28, 2026).
A Fed governor is telling markets that AI capital spending is part of the reason inflation is still above target — and that a productivity payoff will not arrive in time to cancel out this year's broader price pressure.
Black-owned businesses face three costs from the speech's findings: higher utility bills where data-center demand is growing, a slower path to rate relief, and a tougher entry-level job market for new graduates.
The upside Cook highlights is also concrete: small firms using AI report productivity gains, and her data show small firms create most new jobs. Operators who put AI into workflows, pricing and back-office tasks now are positioning for the medium-term gains she describes.
Barr's economic-outlook remarks in Detroit on Tuesday are the next chance to see whether other Board members share her view.
The Federal Reserve Board on Friday approved Peoples Bancorp Inc., of Marietta, Ohio, merging with Citizens National Corporation and thereby indirectly acquiring Citizens Bank of Kentucky, Inc., both of Paintsville, Kentucky (Federal Reserve Board — Sep 25, 2026).
The Board also approved Peoples Bank merging with Citizens Bank of Kentucky and operating branches at Citizens Bank of Kentucky's locations.
