Fed officials warn: Persistent energy inflation and expected AI productivity gains may force the central bank to raise interest rates.

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Chicago Fed President Austan Goolsby stated on May 28 that energy inflation triggered by the Iran war has lasted longer than expected, posing a stagflationary shock to Asian economies. He also warned that rising expectations for AI productivity, combined with higher oil prices, could force central banks to raise interest rates. (Previous coverage: Draft of US-Iran peace agreement exposed! US troop withdrawal in exchange for unblocking the Strait of Hormuz, crude oil plunges below $89) (Background: Oil prices rise, ETH falls! Tom Lee: Negative correlation between Ethereum and oil prices hits record high) On May 28, Fed's Austan Goolsby stated at the Bank of Japan's Institute for Monetary and Economic Studies conference that energy inflation related to the Iran war has lasted longer than expected, posing a stagflationary shock to Asian economies. He noted that initial forecasts in the futures market had anticipated energy prices to be far below current levels, but actual trends have significantly exceeded market expectations. Although oil prices have retreated recently due to signs of progress in US-Iran peace negotiations, they remain significantly higher than pre-war levels. Goolsby also issued a warning regarding Asian economies, stating that because these economies rely on energy imports, this shock is more akin to a traditional stagflationary shock. Fed may raise interest rates On the same day, Goolsby further reinforced his warning: the market's heating expectations regarding the potential for AI to boost productivity could drive up inflation and force the Fed and other central banks to raise interest rates. He stated that the stronger the hype surrounding future productivity, the higher interest rates may need to rise to prevent the economy from overheating. More importantly, facing supply shocks in the short term—whether from oil prices, supply chain disruptions, or other factors—will only exacerbate the problem. These remarks further expanded on the views Goolsby first publicly proposed earlier this month. At that time, he questioned the view that AI would have an inflation-dampening effect, thereby creating room for central banks to cut interest rates—a view championed by many officials in the Trump administration and the new Fed Chair Jeremy Wash. Market theory shifts to front-loading inflation Goolsby believes that if productivity gains are anticipated by the market, the actual situation will be different. The market may trigger a spending boom in advance, driving up prices before the actual productivity gains are realized. This differs from the experience in the 1990s, when the US saw an unexpected surge in productivity due to the widespread adoption of computers; at that time, productivity growth was not anticipated by the market, and thus did not trigger inflation. In contrast, as a major energy importer, Taiwan also faces pressure from energy inflation. Goolsby's warning suggests that if oil prices remain high, inflation in Taiwan may be more persistent than expected, compressing the room for the central bank to cut interest rates. Meanwhile, as the AI industry serves as a growth engine for Taiwan's economy, if expectations of productivity gains are already reflected in the market and drive up prices prematurely, Taiwan will face similar stagflation risks. As US-Iran peace negotiations continue, the market should closely monitor whether the supply shocks mentioned by Goolsby will persist into the third quarter, as this will influence the policy paths of global central banks.

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Published:2026-05-28 03:04:35

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