Cleveland Federal Reserve President Beth Hammack said inflation is still running above the central bank's 2% target, and she pointed to rising demand tied to artificial intelligence as a fresh source of price pressure. Her remarks signal that the Fed should move cautiously on any further policy easing.
Inflation Still Stubborn
Hammack warned that inflation has not yet returned to the Fed's goal. Despite progress over the past year, price increases remain elevated in several categories. She noted that the labor market remains strong, which could keep upward pressure on wages and prices.
AI Demand as a New Risk
The Cleveland Fed president flagged a newer factor: demand driven by artificial intelligence. As companies race to build out AI infrastructure, including data centers and advanced chips, that spending is adding to overall demand in the economy. Hammack suggested this could make it harder to bring inflation down to 2% without tighter policy.
Caution on Monetary Policy
Hammack signaled that the Fed should be careful about cutting interest rates too soon. She emphasized that policymakers need to see more evidence that inflation is sustainably moving toward the target before easing. Her comments align with a more cautious tone from some other Fed officials in recent weeks.
The remarks come as the central bank prepares for its next meeting. Investors will be watching for any shift in the Fed's stance as new data on inflation and employment are released.
