The Federal Reserve's "former doves" directly point to two major rate hike risks: US-Iran war and AI.

The former "dove" of the Federal Reserve, Chicago Federal Reserve President Austan Goolsbee, once again issued a warning about the inflation outlook on Wednesday, even mentioning the possibility of a rate hike. Goolsbee pointed out that since the outbreak of the US-Iran conflict, inflation has not only failed to continue to fall towards the Federal Reserve's target of 2%, but has actually risen slightly. In an interview with the media, he stated that the overall labor market in the United States is still stable, and the main issue currently facing the Federal Reserve is likely to be high inflation. "This is why I remain highly cautious about inflation risks, because it is not a stagnation-type shock at the moment, but purely an inflation shock. The longer this situation persists, the more concerned I become," he said. It is worth noting that before the war in Iran pushed up oil prices, Goolsbee was relatively dovish among Federal Reserve policymakers. But now he clearly lacks confidence in rate cuts. In fact, he has released hawkish signals multiple times since the war began, and has previously stated that if the inflation issue persists, it may be necessary to raise interest rates in the future. AI may trigger rate hikes? On the other hand, Goolsbee also warned that as people have expectations for economic prosperity led by artificial intelligence (AI), if large-scale business investment and consumer spending occur before actual productivity improvements, the economy may overheat and the Federal Reserve may need to raise interest rates. On that day, Goolsbee said at a panel discussion at the Milken Institute Global Conference, "Under such circumstances, it is not clear whether the Federal Reserve needs to cut interest rates. But they may need to raise interest rates." "If it (AI) is as good as advertised, then... it will definitely make us wealthy," he added. "But if this situation will take some time to materialize, I think we indeed need to be more cautious and vigilant." In fact, with the continuous popularity of AI, the improvement in productivity growth and whether it may become a lasting phenomenon and have a positive impact on the economy are issues that central banks and financial markets worldwide have been actively discussing. Some people believe that the experience of the 1990s shows that faster productivity growth can reduce inflation, leading to a decrease in interest rates. Kevin Warsh, the incoming chair of the Federal Reserve, also believes that artificial intelligence will significantly increase productivity, thereby curbing inflation and allowing the Federal Reserve to lower interest rates. Cathie Wood, a Wall Street star fund manager and the head of Ark Investment, also said in the same panel discussion that she expects artificial intelligence to sustainably increase real GDP by as much as 8%, as artificial intelligence improves productivity, which she expects to be accompanied by a "massive undercurrent of deflation." Goolsbee then asked: Is this prosperity based on existing technology or on speculation about recent technological progress? He said that if it is the latter, then the returns will diminish. He cited the example of self-driving cars, initially predicting that self-driving cars would become widespread, to the point where all professional drivers in the United States would be unemployed within five years, but "obviously things didn't progress as quickly, and the returns diminished." "So when I see these massive data center expenditures, I can't help but wonder how much of the progress we currently see will reach the limits of growth," he said. Goolsbee further stated that economic theory indicates that the answer to raising or lowering interest rates depends on whether productivity growth is unexpected or within expectations. He cited the experience during the tenure of former Federal Reserve Chairman Greenspan in the 1990s, pointing out that initially, the increase in productivity did help boost corporate profits and job growth without significantly pushing up inflation, allowing the Federal Reserve to maintain stable interest rates. But as the increase in productivity became widely recognized by the market and drove rapid increases in investment and asset prices, Greenspan later became wary of the risk of overheating in the market, and the Federal Reserve eventually raised interest rates significantly. "If consumers and businesses expect future productivity to increase, this may change their behavior today and make the interest rate situation more complex. The more optimistic the market is about future productivity increases, the more the Federal Reserve needs to prevent the economy from overheating. The more excessive speculation, the more interest rates need to rise," he added. This article is reprinted from Cailian Press; GMTEight Editor: Xu Wenqiang.