Fed’s Bowman says there is still work to do on inflation and warns of a stock correction if AI bets don’t pan out

Federal Reserve Vice Chair for Supervision Michelle Bowman said there is “still work to do” on inflation¹. She said persistent inflation and a firming labour market indicate that “there’s still work to do”².

Bowman delivered a speech on the US economy on Tuesday⁴. In it she said she sees a number of risks to the economic outlook, and she warned of a stock correction if bets on artificial intelligence do not pan out³.

She pointed specifically to hyperscalers’ off-balance-sheet support for smaller data center developers, and to equity stakes that chip designers have taken⁶.

Why it matters to investors

The remarks touch both sides of the investment picture. On inflation, Bowman’s message that the job is unfinished¹ came as her remarks on inflation and rate hikes drew attention on the day².

On markets, a Fed official publicly linking a possible stock correction to the outcome of AI bets³ is notable, because it ties the financial-stability debate directly to the AI investment cycle⁶. Her focus on off-balance-sheet support from the largest cloud companies to smaller data center developers⁶ points to financing structures that may not be visible in headline balance sheets.

Readings of her stance on rates differ. One account said Bowman considers inflation still too high but is not calling for more interest-rate hikes right now, with her argument centred on markets⁵. That account describes her as seeing inflation cooling without more rate hikes⁵. Other coverage framed her remarks in terms of persistent inflation and a firming labour market that leave “still work to do”², and discussed them alongside the prospect of rate hikes².

What to watch

The first question is how Bowman’s view feeds into the December decision. Her comments that inflation remains unfinished business¹ sit alongside the report that she is not now pressing for further hikes⁵.

The second is the AI financing she flagged. Hyperscalers’ support for smaller data center developers and chip designers’ equity stakes⁶ are the channels she identified, and a correction in AI-linked stocks is the risk she described if the bets fail³.

The third is the labour market. Bowman cited a firming labour market as one reason the work on inflation is not done², so incoming jobs data will bear on how her assessment develops. Her full speech text has been published by the Fed⁴.