SF Fed president: AI demand could extend energy shock
Summary
Mary Daly, president of the San Francisco Federal Reserve, said that strong demand for computers used in artificial intelligence (AI) could cause a shortage of computer chips and raise prices for a long time. This might keep inflation high and make it harder for the Fed to lower inflation by raising interest rates.Key Facts
- AI demand is increasing the need for computer chips beyond just big data centers.
- Some companies are buying chips in advance to ensure they have enough supply.
- Companies are redesigning products to use fewer chips, showing concern about future shortages.
- Chip shortages in AI could affect other products like cars and appliances, raising their costs.
- The Fed usually expects supply shocks to ease within 1 to 3 years, but this AI-driven shock may last longer.
- Firms that drive AI expansion are less affected by higher interest rates, making inflation harder to control.
- Daly supports the recent Fed interest rate hike to address rising inflation.
- Future Fed decisions will depend on whether energy and trade pressures on inflation decrease.
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