Hassett: AI-Driven Growth Is Easing Inflation, U.S. Slow to Cut Rates

Kevin Hassett, a candidate under consideration for the Federal Reserve chair role, told reporters that the recent surge in artificial intelligence-related activity is simultaneously accelerating economic growth and exerting downward pressure on inflation. Speaking about the evolving macroeconomic backdrop, Hassett argued that productivity gains and cost efficiencies tied to AI could justify a faster move toward easing monetary policy than policymakers currently anticipate.

Hassett’s comments reflect a growing conversation among economists about how technology-driven productivity may change the inflation outlook. He suggested that if AI continues to materially raise output per worker and reduce production costs across sectors, those effects could help keep inflation subdued even as demand strengthens. For Hassett, that dynamic means the U.S. may be “behind the curve” in preparing to lower interest rates, a position that contrasts with more cautious views emphasizing the risk of rekindling inflation.

The former economic adviser urged central bankers to weigh the changing supply-side forces when assessing the timing of rate cuts. Market participants have been watching for clear signals from the Fed about when a pivot from restrictive policy might begin; Hassett’s remarks add to pressure on officials to be forward-looking about technological impacts on price dynamics. If the Fed underestimates the disinflationary force of AI, it could keep policy tighter than necessary, potentially slowing growth or increasing unemployment.

At the same time, Hassett acknowledged policy risks. Moving too quickly to ease could stoke inflation if the anticipated productivity gains fail to materialize at scale. The path forward, he said, requires careful monitoring of labor markets, wage trends, and productivity metrics alongside price data.

Investors and policymakers will likely parse Hassett’s statements for clues on how a Fed chair with these views might prioritize trade-offs between growth and price stability. While his comments do not represent formal Fed policy, they underscore how technological shifts — particularly the AI boom — are reshaping debates over the appropriate timing and pace of interest-rate reductions.