Fed's Cook Sees Inflation Risks Tilted to Upside

Inflation is more likely to accelerate than cool given price pressures arising from an artificial intelligence boom and major supply shocks, Federal Reserve Governor Lisa Cook said Wednesday. While consumer and producer prices decreased last month, the Fed's preferred inflation measure is expected to have increased 3.7% in the 12 months through June, Cook said in remarks prepared for an event in Washington, D.C. The central bank targets 2% inflation, as measured by the personal consumption expenditures price index. That means inflation has been above the Fed's 2% target for more than five years now, she said. "If we do not see signs of disinflation soon, I am prepared to act," Cook said. Risks are skewed toward higher inflation as companies increasingly spend on AI infrastructure and the world navigates supply shocks, she said. Companies have announced more than $1.5 trillion in data center plans, she said. AI spending "has caused significant price increases for chips, other high-tech equipment, software, and utilities," Cook said. Meanwhile, tariffs and the Middle East conflict risk keeping inflation higher for longer, she said. "Economists would expect these shocks to.