Federal Reserve's Mursalem warns: Don't count on AI to solve inflation problems, the door to rate hikes cannot be closed.

Alberto Mussalem, President of the Federal Reserve Bank of St. Louis, stated on Thursday that policymakers cannot rely on the potential productivity boom brought by artificial intelligence to alleviate the current inflation problem, and warned that the possibility of future interest rate hikes cannot be ruled out. Speaking at a conference in Reykjavik, Iceland, Mussalem said, "I think it is risky to rely on the prospect of higher future productivity growth to solve our current inflation problem." Although he admitted to being a fervent user of artificial intelligence and optimistic about the long-term economic potential of the technology, he also noted that market enthusiasm for AI is driving up demand for electricity and chips, leading to rising stock prices of related companies, which could in turn prompt central banks to raise interest rates. At the same time, newly released economic data has intensified inflation concerns. Data released by the Bureau of Economic Analysis on Thursday showed that the Fed's preferred inflation gauge - the Personal Consumption Expenditures Price Index rose 3.8% in the 12 months ending in April. In addition, futures pricing contracts indicate that investors are betting that the Fed will raise rates before the end of the year, with the probability exceeding 50%. During an interview with Bloomberg TV, Mussalem agreed with some officials who want the Fed to remove wording indicating a "dovish tilt" towards interest rates in its policy statement in April. He emphasized, "Our mandate is to maintain price stability and maximum employment; currently the inflation rate is still above target. Therefore, our consideration of the possibility or probability of raising rates in the future - I believe it must be greater than zero." Regarding the recent rise in US Treasury yields, Mussalem estimated that about three-quarters of the increase was due to market expectations of a higher neutral interest rate in Fed policy, with only a quarter coming from the so-called term premium, which is believed to have a more direct impact on financial conditions. The next Fed policy meeting is scheduled for June 17-18, and this will be the first meeting chaired by new chair Kevin Wash. Wash has previously stated that artificial intelligence could lead to a productivity boom, resulting in non-inflationary growth and lower interest rates. Mussalem takes a more cautious stance, believing that in the current environment, there should not be excessive reliance on the long-term benefits of AI to solve current inflation pressures.