Fed Governor Cook Says Supply Shocks Are Having Persistent Effects
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Federal Reserve Governor Cook said on the 1st that recent supply shocks are having surprisingly persistent effects and are becoming a more important challenge for monetary policy. Speaking at an event at the New York Fed's headquarters in a discussion with New York Fed President Williams, Cook noted that under the traditional view, supply shocks have been overlooked because tightening monetary policy has no effect on oil prices or wars while it risks cooling hiring and production. She said, however, that the optimal policy response may now differ depending on which sectors are affected by supply shocks. Cook also said the biggest risk in 2027 is artificial intelligence, warning that AI could lead to a large-scale reorganization of labor, and noted that AI-related investment is creating inflationary pressure that may not ease anytime soon.