Fed’s Williams says AI is reshaping supply in ways not fully understood

New York Fed President John C. Williams has a new item on his list of things keeping inflation elevated, and it is not oil or tariffs. It is artificial intelligence. Williams said AI is influencing supply in ways that are not yet fully understood. For a central banker whose job depends on reading the economy accurately, that admission matters. The comment follows a run of late September 2026 remarks. In them, Williams described AI-driven demand as an inflation force the Fed has to watch closely. A race between supply and demand The core issue is simple. AI buildouts need specific physical goods: chips, power equipment and the inputs that go into data centers. Demand for those goods is rising faster than producers can make them. Williams called the situation a race, and he framed it in his own words: “A race between available supply and surging demand.” In his September 29, 2026, remarks, Williams named three forces behind inflation. Tariffs were the first, though he said they are no longer having an impact. The second was energy and commodity pressure tied to the Middle East. The third was AI-related demand for particular goods and services. Williams described the inflationary effe...