AI's Impact on US Labor Market May Limit Fed's Ability to Cut Rates Amid Inflation Concerns

Published: Feb 28, 2026 13:55

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US Fed Governor Cook pointed out that the rise of AI technology has triggered generational shifts in the US labour market, a change that may lead to an increase in the unemployment rate. In this context, the US Fed may find it difficult to respond through interest rate cuts, and monetary policy could face a dilemma: on one hand, interest rate cuts have limited effectiveness in addressing structural unemployment; on the other hand, they may further push up inflation.

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