Robbie Klages points out that Waller hinted the Fed may consider raising interest rates due to high inflation, but he believes it will be difficult to implement
AI has led to large-scale layoffs in companies (such as Volkswagen cutting 50,000 jobs), and labor replacement is a real issue; raising interest rates will increase pressure.
Traditionally, lowering interest rates stimulates hiring, but current rate cuts may encourage companies to invest more in computing power, creating a policy dilemma.
Source: Public Information
ABAB AI Insight
As a market observer, Robbie Klages has previously discussed the macro impact of AI, questioning the Fed's "higher for longer" policy amid the tech layoffs from 2023 to 2025. Waller's statement as a hawkish committee member reflects internal debate.
The Fed faces dual pressures from inflation and structural unemployment due to AI; lowering interest rates may increase capital expenditure rather than employment, with the motivation being to balance short-term stability with long-term technological transformation, avoiding policies that exacerbate economic division.
This dilemma is similar to the monetary policy challenges during the Industrial Revolution or the adjustments after the tech bubble in the 2000s. The Fed is currently transitioning from cyclical management to addressing technological shocks.
Essentially, this is about technological substitution: AI labor replacement is reconstructing the monetary policy transmission mechanism, where the marginal benefits of rate cuts shift from labor to capital goods (computing power), forcing central banks to recalibrate tools to address structural rather than cyclical unemployment.
ABAB News · Law of Cognition
Interest rate hikes worsen the situation during AI layoffs, while rate cuts fuel a computing power frenzy.
Traditional tools fail, and technological shocks rewrite the macro script.
Employment vs inflation, old frameworks struggle against new paradigms.