Fed Minutes Say AI Investment Could Lift Productivity as Rate-Hike Risks Rise

Federal Reserve officials saw accelerating artificial intelligence investment lifting productivity and the U.S. economy’s potential output, while most considered another interest-rate increase before year-end potentially appropriate, minutes from the September meeting showed.

Several participants said the scale and pace of AI-related construction had continued to exceed expectations. Participants broadly viewed the investment as likely to support productivity and potential output over the next several years, though they differed over how large the gains would be and when they would appear.

The minutes also showed that several officials believed current monetary policy was either not restrictive or only mildly restrictive. Some participants said inflation risks had increased in recent months, strengthening the case for additional tightening.

Federal Reserve staff raised their economic and employment outlooks, projecting faster growth in the second half of the year and growth above potential through 2028. The staff expected unemployment to remain below its longer-run level through 2029, while inflation projections for 2026 through 2028 moved higher from July estimates before returning to 2% in 2029.

The Federal Open Market Committee held its September meeting. The minutes add detail to the Fed’s policy debate as officials weigh stronger investment and productivity prospects against renewed inflation pressure.