Federal Reserve Chairman Powell: AI infrastructure pushing up chip prices does not equal inflation, still "unsatisfied" with inflation index.

Federal Reserve Chairman Kevin Wash testified before the Senate Banking Committee on Wednesday, stating that the price increases resulting from the construction of artificial intelligence (AI) infrastructure do not necessarily mean sustained inflation. Although AI investments have driven up prices for products such as computer chips, with the increase in supply, these one-time price adjustments may not necessarily evolve into widespread and sustained inflationary pressures. During the hearing, Wash frequently mentioned his dissatisfaction with inflation, stating, "Recent inflation data may not perfectly reflect potential inflation situations. The labor market looks fairly good, but I am not very optimistic about inflation. I am not satisfied with any inflation indicators. We will examine our tools, including the balance sheet and interest rates, to see if adjustments are needed to address inflation." In response to questions from lawmakers about the impact of the AI boom on inflation, Wash stated that the Federal Reserve will continue to assess the impact of AI investments on prices. He pointed out that current AI infrastructure investments have indeed driven up chip prices, but this is fundamentally different from supply shocks caused by geopolitical conflicts. "I do not believe that one-time price changes necessarily imply inflation, as supply will eventually react," Wash said. "This is different from overseas conflicts, which typically weaken the supply capacity of the economy." However, he also acknowledged that AI investments in the next 12 months may raise prices for some goods. "I do expect that it will indeed have an impact on statistically significant price levels, but whether it constitutes true inflation will be judged by the Federal Reserve, and we will provide a clear policy response to it." Wash also stated that in the long term, AI will boost productivity in the U.S. economy and further drive wage growth. He pointed out that current wage growth in the United States is at a reasonable level, and with continued improvements in productivity, wage levels are expected to further increase. In another question, Wash refused to disclose whether he had communicated with President Trump since taking office as Federal Reserve Chairman in May this year, emphasizing that he will continue to maintain the independence of the Federal Reserve. "People have chosen an independent person to do an independent job, and that is exactly what I plan to do," Wash said. "The President has never asked me to do anything inappropriate, and even if he did, I would not comply." Furthermore, regarding Democratic Senator Elizabeth Warren's request to investigate Federal Reserve Vice Chairman for Supervision Michelle Bowman's attendance at a private banker meeting during the quiet period before last month's policy meeting, Wash stated that it will be handled by the Federal Reserve's internal oversight body and refused to respond to whether he had discussed this matter with Bowman. Wash reiterated that the Federal Reserve has "zero tolerance" for high inflation and will continue to work towards bringing inflation down to target levels. He stated that while U.S. consumer inflation data for June was weaker than market expectations, mainly due to the temporary easing of tensions between the U.S. and Iran, with tensions escalating again and international oil prices rising, inflation risks still need to be closely monitored. The latest data shows that the core Producer Price Index (PPI) for June in the United States was also lower than market expectations, indicating that underlying inflationary pressures remained moderate overall that month. Meanwhile, minutes from the Federal Reserve's monetary policy meeting on June 16-17 showed that policymakers have become more concerned about future inflation risks, while concerns about a slowdown in the labor market have eased slightly. At Wash's first policy meeting as Federal Reserve Chairman, the Federal Open Market Committee (FOMC) unanimously voted to keep the federal funds rate target range unchanged at 3.5% to 3.75% for the fourth consecutive time.