Federal Reserve officials warn that AI-driven productivity gains could push up neutral interest rate levels.

Recently, several Federal Reserve officials have hinted that artificial intelligence driving productivity growth may bring upward pressure on interest rates. This view is contrary to the opinions of the Trump administration and its nominee for the next Federal Reserve chair. Federal Reserve Governor Michael Bahr stated in a speech prepared for a conference in New York on Tuesday, "I do not expect AI prosperity to be a reason to lower policy rates." Federal Reserve Vice Chairman Phillip Jefferson also stated in a speech on February 6th, "Under unchanged conditions, continued accelerating growth in productivity may lead to an increase in the neutral interest rate, at least temporarily." As President Trump continues to pressure the Federal Reserve to cut rates, AI and productivity may become a focus in this year's rate discussions. The Federal Reserve cut its benchmark rate three times in 2025 and maintained rates at its January policy meeting. Money market pricing shows that investors currently do not expect a return to rate cuts before mid-year. Trump has nominated Kevin Wash to succeed Jerome Powell as Federal Reserve chair after his term expires in May. Wash agrees with Trump administration officials that AI may bring prosperity in productivity, providing room for interest rates to decrease while driving non-inflationary growth.