AI has increased productivity and encouraged capital investment in the U.S., which should lead the Fed to lower interest rates, according to White House economic adviser Kevin Hassett.
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Trade QQQ with leverage“If we have a supply shock like we’re seeing because of all this capital spending … AI increasing productivity, it puts downward, downward pressure on inflation, and that should take the pressure off the Fed,” Hassett told CNBC. “They should be able to lower rates.”
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Hassett added that he expects Kevin Warsh, President Trump’s Fed Chair nominee, to support lower rates if he succeeds current Fed Chair Jerome Powell.
However, rate cut odds have slumped in recent weeks as rising oil prices stoke inflation fears. By year-end, the most likely outcome, at 79% odds, is for the central bank to hold rates steady. The odds of one rate cut are at 10%, down from 32.5% a month ago, while the odds of one rate hike are at 10.4%, up from 0%.