Fed's Cook Sees Persistent Inflation From AI Demand, Oil Prices; Markets Price 75% Odds of October Hike

Federal Reserve Governor Lisa Cook said Monday she expects continued inflationary pressure in coming months from AI-related demand and higher oil prices, but stopped short of endorsing further rate hikes. Speaking in Oakland, California, Cook said the labor market appears well positioned to handle an increase in rates. The Fed raised its policy rate this month for the first time in three years, with Cook supporting the unanimous vote. Policymakers penciled in one more hike by year-end. Markets are pricing about a 75% chance of a Fed rate hike next month and a strong probability of a third straight increase in December. Cook noted inflation was about 3.8% in the 12 months through August, roughly double the Fed's 2% target, and has run above target for more than five years. She cited the AI buildout, oil-price pass-through and Middle East supply disruptions as near-term inflation drivers, adding that AI-driven productivity gains will not deliver disinflation fast enough this year.