The FOMC discussed, in the minutes of the July 28-29 meeting recently released, two distinct risks related to artificial intelligence. The first concerns inflation. Some participants judged that the investment boom in the sector is already fueling demand and price pressures, or will do so soon. The second concerns financial stability. The sharp rises in AI-related stocks, if tech earnings estimates were to be revised downward, could trigger a widespread market decline and put pressure on financial institutions most exposed to the sector.
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Fed economists judged asset valuation pressures to be “high,” noting that the equity premium has fallen to a level seen only during the dot-com bubble of the early 2000s.
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On the price front, inflation remains high. Total inflation, measured by the PCE index, was 4.1% in May and core inflation was 3.4%. Economists estimated a decline to 3.7% and 3.3% respectively in June. Many participants said that a rate hike will be necessary if inflation does not slow down, and the committee continues to see upside risks to prices.
Warsh proposes reducing FOMC meetings to six per year
Fed Chair Kevin Warsh noted that “six scheduled meetings per year, approximately every two months, would allow for the accumulation of more information between meetings compared to the current practice” of eight meetings, “also providing decision-makers and staff more time to examine strategic monetary policy issues. The Chair solicited the Committee’s views on these aspects; however, no decision was made regarding possible changes to the meeting schedule and the Chair clarified that any change in practice would not affect the planned schedule for the rest of 2026.”
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