Mary Daly, president of the Federal Reserve Bank of San Francisco, has warned that the integration of artificial intelligence into the economy could lead to long-term inflationary pressures. According to Daly, the surge in demand for high-end chips and the associated energy requirements for data centers may create a supply shock that persists longer than typical market fluctuations.

While the Federal Reserve often manages temporary supply chain disruptions by looking past them, Daly expressed concern that a combination of AI-driven demand, potential tariffs, and rising energy costs could compound. This scenario, she suggests, might force the central bank to maintain tighter monetary policy for a longer period than previously anticipated. The core of the concern is that the demand for AI infrastructure is spreading beyond the technology sector, potentially straining energy grids and supply chains before production capacity can catch up. By framing these factors as potentially persistent rather than transitory, Daly highlights a shift in how the Fed may need to evaluate future economic data when determining interest rate adjustments.