Fed's Cook Warns $1.5 Trillion AI Buildout and Iran War Keep Inflation Too High

2 articles · Updated · American Banker · Jul 15

Lisa Cook said inflation is "simply too high" and warned the Fed is prepared to act if disinflation does not resume soon.
Two new shocks are driving that view: the Iran war has lifted energy prices that can spill into food, while AI data-center expansion is raising demand for chips, software and utilities.
Cook said more than $1.5 trillion in data-center investments have been announced, with only part completed, suggesting those price pressures could intensify.
The balance of risks has shifted toward inflation rather than employment, she said, with the labor market still resilient and unemployment holding near 4.2%.
Her remarks align with other Fed officials' warnings that the central bank cannot repeat its 2021 delay in responding to persistent inflation and still has not returned inflation to its 2% target in over five years.

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American Banker3h ago

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If AI is breaking our economic yardsticks, how can the Fed be sure its inflation fight is aimed at the right target?

Could the Fed's fight against AI-driven inflation sabotage the technology's long-term deflationary benefits?

Is monetary policy the right tool to fix a strained national power grid fueling AI inflation?

The Cost of Progress: AI Infrastructure, War, and the Federal Reserve’s Battle With 4.2% Inflation

Overview

The rapid growth of artificial intelligence is fueling a major expansion of digital infrastructure, especially data centers, across the United States. This surge is powered by strong investor confidence and large amounts of available capital, with private infrastructure funds holding over $1.7 trillion and favorable financing conditions making new projects attractive. However, this boom brings significant financial costs, environmental concerns, and social challenges, as communities push back against new developments and policymakers begin to respond. The interplay between investment, resource strain, and public opposition is actively shaping the economic and political landscape in 2026.

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