Cook warned that AI-related job displacement could outpace job creation, potentially raising unemployment beyond Fed control, while AI investment may temporarily push up the neutral rate.
Federal Reserve Governor Cook stated that AI adoption is causing generational shifts in the U.S. labor market, with job losses potentially occurring before new roles are created. She warned that rising unemployment driven by AI may be beyond the Fed’s ability to address through rate cuts without risking inflation. Additionally, she noted that AI-fueled investment could temporarily raise the neutral rate, which determines the interest rate level that neither stimulates nor restricts growth. This scenario could tighten financial conditions and impact markets sensitive to liquidity, including crypto assets.