Fed Official Signals Possible Interest Rate Hike as US Inflation Remains High

CALIFORNIA, Jakartaweekly.com —Amid persistently high inflation in the United States, member Board of Governors of the Federal Reserve Lisa D. Cook said interest rates could still rise, with policymakers awaiting new economic data set to be released in the near future.

Cook delivered the remarks during a speech at the Stanford Institute for Economic Policy Research at Stanford University in Stanford, California, on Wednesday, May 27, 2026 local time.

According to her, the Federal Reserve has chosen to keep interest rates steady for now because inflation risks remain elevated. However, she said the central bank remains open to raising rates if inflation does not ease as expected.

“Conversely, interest rates could also be lowered if labor market conditions deteriorate,” she said in California on Wednesday, May 27, 2026.

Cook said inflation in the United States is still moving in an undesirable direction. Based on the latest data, the Personal Consumption Expenditures (PCE) price index is estimated to have risen 3.8 percent over the 12 months through April, far above the Federal Reserve’s 2 percent inflation target.

Meanwhile, core PCE inflation is projected to reach 3.3 percent, the highest level since 2023. According to Cook, rising energy prices driven by the Iran conflict are among the main factors fueling inflation.

In addition, the surge in AI investment has also begun adding price pressures across various sectors of the economy. Cook revealed that global companies have announced more than US$1.5 trillion in AI data center investments, although only a small portion has been realized so far.

She said the impact is already visible in rising prices for chips, high-tech equipment, software, as well as electricity and water costs, which have increased around 5 percent over the past year.

Despite elevated inflation, the U.S. labor market is considered relatively stable. The unemployment rate stood at 4.3 percent in April and has changed little since last summer. However, Cook warned that AI could trigger major workforce reorganization in the coming years.

On the other hand, Cook expressed optimism that AI will boost productivity and economic growth over the medium term. She described AI as the most transformative technology she has seen in her lifetime.

In the financial sector, Cook said AI has the potential to improve the efficiency of financial services, expand access to credit, accelerate data analysis, and strengthen cyber risk detection. However, AI could also create new risks, including increasingly aggressive algorithmic trading, market concentration, market manipulation, and rising debt linked to the construction of AI infrastructure such as data centers.

She added that the Federal Reserve has begun using AI to support financial stability analysis. The Fed has established a special team to study the impact of AI, cybersecurity, and quantum computing on the U.S. financial system.