Cleveland Federal Reserve President Beth Hammack warned that artificial intelligence adoption may be fueling inflation, raising the possibility of additional rate hikes. "We've got inflation that's too high, and it's been too high for the past five years," Hammack told CNBC's Sara Eisen, signaling the central bank's ongoing struggle to bring price pressures under control.
Hammack's comments come as AI-driven productivity gains and investment surges create new demand-side pressures, complicating the Fed's inflation fight. While some officials view AI as deflationary over the long term, Hammack argued that near-term effects—including higher capital spending and wages for tech talent—could keep inflation elevated. She did not specify the magnitude or timing of potential rate moves but stressed that the Fed must remain vigilant.
The remarks weighed on equity futures, with rate-sensitive sectors like technology and real estate facing renewed uncertainty. Bond yields edged higher as traders priced in a more hawkish Fed path, while the dollar strengthened against major currencies. The S&P 500 and Nasdaq both dipped in early trading, though losses were modest as investors weighed Hammack's views against other Fed speakers who have struck a more dovish tone.
Some analysts pushed back, noting that AI could ultimately lower costs across industries. "Hammack may be overstating the inflationary risk," one economist argued. "Productivity gains from AI typically reduce prices over time." Still, her warning adds to a growing debate about how the Fed should balance innovation with price stability—a tension likely to intensify as more AI companies pursue public listings.