Kevin Warsh believes that the surge in artificial intelligence investment may temporarily raise prices without producing persistent inflation. According to Tom Lee, the Federal Reserve chair sees this demand shock as preceding the longer-term gains in productivity and wealth. His position comes amid stubbornly high inflation, with the Consumer Price Index reaching 3.7% in September 2026 against the Fed’s 2% target. Despite the persistent overshoot, the central bank kept interest rates steady in late October 2026, partly to avoid stifling AI investment. The key risk for monetary policy lies in the timing of the supply response: if it arrives more slowly than expected, inflation could remain elevated while interest rates stay unchanged.
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