Fed President says AI investment may push up interest rates (www.reuters.com)

Federal Reserve Minneapolis President Neel Kashkari warned that heavy investment in artificial intelligence could push borrowing costs higher, arguing that a surge in AI spending may raise aggregate demand and wage pressures. He reiterated support for a cautious, gradual approach to cutting policy rates—saying abrupt cuts could rekindle inflation—and downplayed sweeping predictions that AI will quickly replace large numbers of workers, suggesting displacement may be less dramatic than some forecasts. For the AI/ML community, Kashkari’s comments matter because rising real interest rates and tighter monetary policy change the economics of AI projects: higher discount rates raise the hurdle for long‑term R&D and capital‑intensive deployments, can compress startup valuations, and increase financing costs for scale‑ups. The note also frames an important policy trade‑off—if AI raises productivity on the supply side, it could be disinflationary; but if AI primarily boosts demand or raises wages for scarce technical talent, it could be inflationary—shaping Fed responses. Practitioners and investors should monitor macro signals (wage trends, productivity metrics, investment flows) since central-bank reactions will materially affect funding availability, hiring costs, and ROI timelines for AI initiatives.